Federal Budget & Tax

Federal Budget & Tax: News Blog Background

Friday, February 25, 2005

An editorial in this week's edition of Business Week came out in favor of a fair and responsible estate tax as a means to generate needed national revenue. The editorial said this:

"An estate tax that protects families, small farmers,and businesses can still generate tens of billions of dollars in revenues. Letting lapse the income tax cut of the highest income bracket could also generate billions of dollars of tax revenue that could pay for the teachers and emergency responders who will lose their jobs under budget proposals to reduce federal aid to cities. The budget also calls for cuts in Food & Drug Administration inspections of imported food and medicine -- right after a British plant supply half the flu vaccine to the U. S. was closed due to contamination."

Posted by Becky Lewis, 06:27:12 PM

Reconciliation Measures

Today's CongressDaily News Service reports that GOP Congressional leaders are discussing whether to move separate reconciliation bills for entitlement spending cuts and tax cuts in the reconciliation process. They are also discussing the possibility of potentially moving a third reconciliation measure to increase the debt limit, currently set at $8.2 trillion. The debt limit was increased last November. CongressDaily reports:

"These are the clearest signs yet that GOP leaders are serious about trimming entitlements for the first time since the 1997 balanced budget agreement. Reconciliation offers procedural protections for revenue and mandatory spending bills after successful adoption of the annual budget resolution. By de-linking legislation mandating savings in entitlement programs from a package of tax cut extensions, sources said, Republican leaders would seek to avoid unfavorable comparisons already being voiced by Democrats. "They would be concerned if tax cuts and cuts in critical services are in the same bill because people might think spending cuts for programs like Medicaid are being used to fund tax cuts," said Thomas Kahn, Democratic staff director for the House Budget Committee."

This would indeed be the case if both entitlement spending and tax cuts were passed in the reconciliation process. As the Center on Budget and Policy Priorities reports, Bush's tax policies since 2001 account for 48% of our deficit, yet it is the spending on entitlement programs, such as medicaid and medicare, that are going to suffer from budget cuts in the name of fiscal responsibility. Keep checking the budgetblog for updates on the the reconciliation process as well as Congress' budget resolution.

Posted by Becky Lewis, 03:50:20 PM

The Trade Deficit and the Falling Dollar

As this article in today's Washington Post points out, America's overall indebtedness to foreigners now totals approximately $3 trillion dollars. The trade deficit in 2004 grew 24 percent to a record $617.7 billion.

While the administration and Secretary of the Treasury John Snow are touting the trade deficit as economically beneficial, many economists are wary. In an op-ed piece in the Financial Times a few months ago, Snow wrote, "The deficit reflects foremost the strengths of the U.S. economy -- high productivity, strong U.S. growth relative to growth abroad, and the relative attraction of investing in our robust, dynamic economy, which has the deepest and most resilient capital markets in the world."

Many economists many economists, however, see problems in the fact that as our trade deficit is growing, the money streaming into our country from foreign markets is not helping to finance a boom in assets such as factories and machinery; instead it is contributing to record levels of consumption based on credit by U.S. citizens. This consumption includes the ever-important oil, which our country continues to consume in very high levels. As Thomas Friedman writes in a New York Times column today, "We are importing too much oil, so the dollar's strength is being sapped as oil prices continue to rise. And we are importing too much capital, because we are saving too little and spending too much, as both a society and a government." This falling dollar without any checks on spending, he points out, could lead to problems down the road. He quotes former Clinton Commerce Department official David Rothkopf as saying "Given the number of people who have refinanced their homes with floating-rate mortgages, the falling dollar is a kind of sword of Damocles, getting closer and closer to their heads. And with any kind of sudden market disruption - caused by anything from a terror attack to signs that a big country has gotten queasy about buying dollars - the bubble could burst in a very unpleasant way."

See this editorial in today's Times for more information on why the weak dollar is not currently helping our economic situation.

Posted by Becky Lewis, 12:10:57 PM

Wednesday, February 23, 2005

Chapter on Iraq Excluded from Economic Report
It was reported in the Washington Post this morning that the Bush administration purposely excluded a completed chapter on Iraq's economy from its Economic Report of the President, which was released a few days ago. The National Security Council requested the chapter be removed, reasoning not that there was sensitive data that could lead to increased security concerns, but that the "feel-good" tone of the chapter would make the administration look bad amid continuing violence.

This is an extreme and unprecedented decision by the Bush administration. The Council of Economic Advisors (CEA), who produces the report, is supposed to be an independent entity and its members have long prided themselves on their academic integrity.

While there have been disagreements between White House staff and members of the council over past reports, the deletion of an entire completed chapter was described by former CEA members as "extraordinary," and "extreme."

This decision paints a broader picture of the Bush administration and the CEA with respect to policy analyses. Former CEA member under President Reagan William Niskanen said this showed that the council had been significantly weakened. Others observers are afraid this is just one more example of an administration that does not value lengthy, reasoned analyses of its policies. A former policy advisor to Presidents Reagan and Bush I, Bruce Bartlett commented, "They just don't seem to show that serious study is an important part of politics. [The current Bush administration] takes a very casual, hands-off, almost lackadaisical approach to the policy process."

Posted by Adam Hughes, 11:41:13 AM

Watcher: February 23rd, 2005
Federal Budget

Posted by Becky Lewis, 10:42:30 AM

Tuesday, February 22, 2005

Options for Tax Reform

Last week the administration released the 2005 Economic Report of the President. The report includes - among other details - a chapter on options for tax reform, which the President has expressed interest in looking into during his second term. To look into tax reform options, Bush has put together an advisory panel on federal tax reform; you can see a list of the members of that panel here. Members of the panel met for the first time last wednesday to discuss how they can go about reforming the tax code to make it simpler, fairer, and more pro-growth to benefit all Americans. The panel will submit their recommendations to Treasury Secretary John Snow in July.

Today's BNA news services reports that the Chairman of the panel, former Senator Connie Mack (R-FL), is calling for public comments to be made on problems faced by both individuals and businesses under current tax laws. Comments are requested by March 18th. See this page for more information on how you can submit comments to the panel.

Posted by Becky Lewis, 12:45:24 PM

Asking the Right Questions

Read this editorial in today's Washington Post for a quick and straightforward discussion of why President Bush's two additional tax cut proposals (that haven't taken effect yet) are unnecessary. These two tax cuts, which begin to phase in next year unless Congress acts, would go to the 4 percent of U.S. households with annual incomes of over $200,000, and would reduce government revenue by over $200 billion.

The column asks the right question: given the growing record deficits and uknown future costs of war endeavors, "Why does President Bush think this tax break is necessary?"

Posted by Becky Lewis, 09:50:20 AM

Thursday, February 17, 2005

Social Security Benefits Cuts Calculator

In continuing efforts to combat what they see as a detrimental plan by President Bush to overhaul Social Security, Senate Democrats have unveiled a new tool to aid their cause: a social security calculator which shows how much individuals will lose if benefits are "price-indexed" as opposed to "wage-indexed." Many Senators are posting these calculators on their official web sites to bring attention to the issue. While the calculator cannot accurately portray what would happen with an overhaul because no specific plan has been announced, it does show what would happen if the criteria to which benefits are currently indexed were to change. This is a policy which is supported by a number of Congressional GOP leaders, as well as many senior administration officials.

Posted by Becky Lewis, 04:29:41 PM

GAO and CBO Reports Discuss Future Outlook

This week the General Accounting Office released "21st Century Challenges: Reexamining the Base of the Federal Government." The report is intended to help Congress in reviewing and reconsidering the base of federal spending and tax programs. The beginning of the report includes a statement from Comptroller David M. Walker. Walker mentions our nation is on an unsustainable fiscal path, and in order to solve our problems and restore fiscal flexibility, "a fundamental reexamination of major spending and tax policies and priorities" is necessary.

A Congressional Budget Office report issued this week attempts to provide Congress with options on how to achive this. The February 2005 Budget Options presents options to House and Senate Budget Committees for possible ways they can alter federal spending and revenues. The options discussed in this report include a range of policy possibilities for the Committees to consider, yet the report offers no recommendations as the CBO's primary objective is to provide impartial analysis.

The CBO also released this week a transcript of CBO Director Douglas Holtz-Eakin's testimony to the Senate Budget Committee. He testified yesterday on the economic costs of long-term federal obligations, in which he noted that long-term paths for spending are slated to rise drastically in many areas over the next forty-five years. He said spending on these programs will either be paid through revenue from taxation or revenue from borrowing. Notably he mentioned that revenue from borrowing eventually will "impl[y] future taxes."

Posted by Becky Lewis, 12:31:31 PM

Wednesday, February 16, 2005

Bush To Consider Raising SS Income Cap
As reported in the Washington Post this morning by Dan Froomkin, President Bush has said for the first time he would consider raising the cap on income subject to payroll taxes.

The president has previously stated firm opposition to raising the tax rate but has remained silent on the cap on social security payroll taxes, currently set at $90,000. The president's announcement opens the door to the possibility of dramatically increasing Social Security revenues. Estimates by Social Security actuaries show by lifting the cap completely, it may be possible to close the entire funding gap in the program over the next 75 years.

Posted by Adam Hughes, 05:20:27 PM

New OMB Watch Report on FY06 Budget
OMB Watch has recently released this new report on the FY06 Budget from the nonprofit perspective. The report outlines some of the misleading aspects of the president's budget and details the more egregious proposals and cuts to programs.

Bush FY06 Budget Impact from the Nonprofit Perspective (.pdf)

Monday, February 14, 2005

Details On the Proposed Program Cuts

Click here to view the government document released late friday night which gives specifics as to which programs were cut or eliminated in the President's FY 06 budget. Bush proposed that 150 programs be cut or eliminated, but specifics as to which exact programs would be hurt were not released until days after the budget proposal came out.

Posted by Becky Lewis, 12:47:02 PM

Senate Republicans Voice Concerns Over Budget

As Senate Budget Committee chairman Judd Gregg (R-NH) noted publicly last week, the release of the President's austere budget not only has Democrats up in arms, but also is creating "some significant angst among my colleagues" on the other side of the aisle. Senator Voinovich (R-OH) in particular has come out against the fiscal irresponsibility of Bush's economic agenda, announcing last week that he will oppose efforts to make the 2001 and 2003 tax cuts permanent. Voinovich said he will vote against the President's budget if necessary, and cited having possible support among other Republican colleagues of his in the so-called "Centrist Coalition," including Senators Collins (R-ME), Snowe (R-ME), and Bennett R-UT). See this Toledo Blade article for additional information.

In related news, an article in today's Washington Post reports other lawmakers, including Senator McCain (R-AZ), have been raising concerns regarding the long term costs of some of Bush's fiscal policies. The article hints that people eyeing the White House in 2008 have reason to be worried since budget costs are expected to drastically increase in the coming years.

Posted by Becky Lewis, 12:03:52 PM

Friday, February 11, 2005

"Bush's Class War Budget"

Read Paul Krugman's op-ed in today's NY Times, titled "Bush's Class War Budget" for a good assessment of who the winners and losers are under Bush's current budget proposal.

Krugman discusses the fact that until the budget was released earlier this week, this notion of fiscal restraint has been "an abstract concept." Yet now we see this restraint tied to specific actions, and those actions will be incredibly harmful both now and in years to come, if this budget is indeed adopted by Congress.

Posted by Becky Lewis, 06:18:09 PM

Senator Gregg Defends Bush's Budget

Click here to see comments made and questions answered by Senator Judd Gregg (R-NH) regarding the President's FY 06 budget. Gregg is chairman of the Senate Budget Committee.

In this particular news conference, Gregg discussed the President's attempt to "discipline the fiscal house of the federal government," and defended some of the President's budget proposals to cut spending in order to reduce the deficit. What Gregg fails to mention is that Bush's tax legislation since 2001 is responsible for 48 percent of our current deficit, yet Bush's proposal for how to deal with the deficit is coming in the form of major cuts to non-defense domestic programs. This discipline will hurt public schools, people on food stamps, National Parks, and affect scores of other programs. True fiscal discipline by Bush would involve more responsible tax policies, because right now Bush is proposing that our current deficit be paid for by people who cannot afford it, all while giving massive tax breaks to very wealthy people.

Posted by Becky Lewis, 12:56:51 PM

Wednesday, February 09, 2005

Budget Details

The FY 06 budget proposal submitted yesterday by the President includes severe cuts for all non-defense discretionary spending. Under the President's plan, discretionary spending in areas other than defense and homeland security would fall by nearly 1 percent. Click here to see a Washington Post breakdown of how the President's $2.57 trillion budget proposal affects each individual agency. Click here and here for information on how the President's budget proposal would directly affect the budgets of states. Click here, here, here, here, and here for good budget analyses by the Center on Budget and Policy Priorities. For a good synopsis on how this budget proposal is protecting the rich while leaving everyone else out, read this article by Robert Borosage. Also, be sure to check out the latest edition of the Watcher for articles from OMB Watch on the budget.

Posted by Becky Lewis, 02:09:20 PM

Tuesday, February 08, 2005

Watcher: February 8th, 2005
Federal Budget

Posted by Becky Lewis, 03:50:09 PM

Monday, February 07, 2005

President's Budget Reflects Administration's Priorities

The President's Budget was released today, and is largely being touted as the toughest budget this administration has ever put together. The roughly $2.5 trillion budget is expected to either reduce or eliminate more than 150 federal programs. It also holds the growth of discretionary spending below levels of inflation. While Vice President Cheney has said the cuts in federal programs "are not something we've done with a meat ax, nor are we suddenly turning our backs on the most needy people in society," the reality is that the number of people living in poverty has increased since 2000, and this budget serves to further cut many programs in need of extra funding, not cuts.

An editorial in today's Washington Post calls the budget a "measure of national character." In many ways this is true -- the budget reflects which priorities the administration feels need further attention, and which are unimportant enough to let fall by the wayside. In this budget, many vital social programs are left behind, although the President's budget outlines a 4.8 percent increase in defense spending. See this article for more details.

This budget release comes at a time when the fiscal health of the nation is struggling. The President's budget, as Cheney says, reflects a "fair, reasonable, responsible, serious piece of effort" on their part to reduce the deficit. Last week the Congressional Budget Office released record-high deficit projections for FY2005, and the administration's "tough budget" is partly in response to this. While keeping this in mind though, it is important to remember that one of the main reason's for this deficit has been Bush's first term tax cuts, which have drained what would have otherwise been available national revenue. Tax cuts, in fact, have played a much larger role in fueling the deficit than discretionary spending has, according to this report from the Center on Budget and Policy Priorities. So, while the President's tough budget can be viewed as a response to what is undoubtedly a dire fiscal situation, we must keep in mind that their actions are anything but reasonable and responsible; in fact their actions punish programs that serve low-income people disproportionately to the level at which these programs truly put a strain on our national budget.

The fiscal situation we find ourselves in today is overwhelmingly due to the administration's tax policies of the past four years. Bush is now proposing cutting billions from programs relied upon by poor and middle class Americans, while he spent the past four years giving money back to people -- disproportionately wealthy people -- in the form of tax cuts. If Bush really wanted to be "tough" on the fiscal situation, he would roll back some of his costly tax cuts. For more information on today's release of the budget, see this article as well as this assessment from the Center for American Progress.

Posted by Becky Lewis, 11:00:28 AM

Thursday, February 03, 2005

Bush's Comments On Social Security

In last night's State of the Union Address, President Bush made Social Security one of his key topics of discussion. In his speech, he mentioned many true statistics about social security. It is true that over the years the number of workers paying into the system compared with the number of retirees collecting benefits is declining. It is true that sometime around the year 2020, if th system is left alone, the Social Security trust fund will be paying out more than it takes in. It is true that some sort of reform will be necessary in order to ensure that the system is solvent in the future.

However, Bush did use some potentially misleading rhetoric during his speech. When discussing the growing Social Security shortfall -- which will begin after the year 2020 -- he said "by the year 2042, the entire system [will] be exhausted and bankrupt." This statement is misleading on many levels. The words "exhausted and bankrupt" do not accurately describe the situation. The Social Security Trustees have predicted a 27 percent benefits cut by the year 2042 if no reforms to the program are passed. The Congressional Budget Office has predicted a 22 percent benefits cut by the year 2052 if no reforms are passed. A cut in benefits of approximately one-quarter is not the same as "exhausted and bankrupt." By that year, our surplus will be exhausted, but not the entire trust fund. Bush used these words in an attempt to make the situation appear more dire than it actually is; in order to garner more support for his plan to overhaul what is, in reality, a financially sound program.

Another interesting comment regarding what would happen if no reforms were passed was when Bush mentioned, "In the year 2027, the government will somehow have to come up with an extra $200 billion to keep the system afloat." While $200 billion sounds like a lot of money, it is nowhere near the shortfall created by Bush's tax cuts -- all of which have been financed by the deficit as opposed to spending cuts. $200 billion is also roughly the amount that our defense operations in Iraq and Afghanistan have cost. If the government is really interested in preserving Social Security - our most successful social insurance and poverty prevention program - there is no doubt they could find other ways to come up with $200 billion, without engaging in a costly overhaul that will also necessitate benefits cuts.

For more on Bush's discussion of Social Security in his State of the Union address, see this article and this article. For a great report on how Bush's plan will phase out Social Security and result in benefits cuts, read this report from the Center for Economic and Policy Research.

Posted by Becky Lewis, 11:48:45 AM

Wednesday, February 02, 2005

Center For American Progress Unveils Progressive Tax Plan

The Center for American Progress has launched a progressive priorities project aimed at providing a positive vision for progressive lawmakers that is supported by a series of innovative policy ideas. The Center is authoring approximately a dozen reports over roughly a two month period that include broad policy recommendations as well as specific steps lawmakers can take in order to achieve these policy goals.

On Monday the Center released one paper in this series about tax reform, called "A Fair and Simple Tax System for our Future: A Progressive Approach." The paper outlines policy necessary to restore a fair, simple, and pro-opportunity tax system, and serves as a responsible and progressive alternative to the tax policies currently embraced by the Bush administration.

Posted by Becky Lewis, 06:18:06 PM

Tuesday, February 01, 2005

Senators Urge Bush to Provide Funding for LIHEAP

Last week a bipartisan group of fifty Senators urged President Bush to release the remaining $200 million in Low-Income Home Energy Assistance Program (LIHEAP) funding contained in the FY 2005 omnibus appropriations bill. The letter said, "We believe the heating crisis facing low-income Americans warrants the immediate release of emergency LIHEAP assistance."

LIHEAP provides bill payment assistance, energy crisis assitance, and weatherization and home repairs to primarily low-income families to help them battle extreme weather conditions and maintain a certain standard of living. It is encouraging the half of the Senate recognize the program's importance and acted on this through a letter to Bush. More information about LIHEAP can be found here and here.

Posted by Becky Lewis, 01:40:48 PM

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