The Government Accounting Office (GAO) has released a very good primer on the challenges facing the Social Security program and the difficult choices Congress and the country must make to address those challenges.

The guide, called Social Security Reform: Answers to Key Questions (GAO-05-193SP, May 2005) provides answers to questions about the most basic aspects of the Social Security and reform issues in a concise and easy-to-understand format. It provides straightforward answers to how Social Security works, why it needs reform, what the basic options are, and how to assess their implications. It also includes a glossary of terms and bibliography of related GAO products.

• Congress Passes Supplemental War Funding Bill
• President's Tax Panel Holds Two-Day Meeting on Reform Proposals
• Update: More States Consider 'Taxpayer's Bill of Rights'

May 10 Sen. Jeff Sessions (R-AL) introduced a bill to repeal the estate tax that would cost considerably more than Sen. Kyl's (R-AZ) version of the bill.

Kyl and Bill Nelson (D-FL) introduced a bill (S. 420) earlier this year that would prevent the one-year estate tax repeal slated to take effect in 2010 from sunsetting. In other words, their bill would institute full repeal beginning in 2010. Sessions' bill would repeal the estate tax immediatly, and would also eliminate the step-up in basis for assets of the deceased. Sessions is arguing that immediate repeal would actually increase government revenues; however the Joint Committee on Taxation and the Center on Budget and Policy Priorities have both found that cost of full repeal would be close to $1 trillion over a decade.

Senate Democrats, led by Senator Charles Schumer (D-NY), are currently working with the Republican leadership to see if there is an estate tax compromise out there that would garner the support of 60 Senators.

Once again, conservative members of the House are leading the push for process changes that would end up implementing spending caps and making it much more difficult to increase funding for programs. Rep. Mike Pence (R-IN), chairman of the Rules Committee, is responsible for resurrecting the fight for budget process reform.

Budget process reform has been an ongoing issue of contention between the conservative rules committee and the House leadership. Conservatives say that the leadership has committed to a vote on reform during the 109th Congress, meaning that we could see this battle played out again. The specific legislation being reintroduced is the Family Budget Protection Act. This harmful act would not protect families; instead it would forcibly hold down federal spending and give the budget the force of the law.

Bill Thomas (R-CA) and the Ways and Means Committee kicked off the first of many committee hearings on Social Security today. The Committee will hear from a number of witnesses, including senior fellow Jason Furman of the Center on Budget and Policy Priorities; Eugene Steuerle, a senior fellow at the Urban Institute; Michael Tanner, director of the Cato Institute's Project on Social Security Choice; Robert Pozen, and former economic advisor to President Bush, Lawrence Lindsey. The Ways and Means Subcommittee on Social Security, which is chaired by Rep. Jim McCrery (R-LA), will hold the next hearing on May 17th.

House Reps remain split on how to proceed with Social Security legislation. Chairman of the House Rules Committee, Rep. Mike Pence (R-IN), said yesterday, "Let's get on with it. Let the House lead on Social Security reform. If the House goes first, we will produce a reform that is consistent with the President's vision for a 21st Century public retirement system." A number of other House members remain skeptical however, raising concerns that it may be risky to pass legislation without knowing it would have Senate support.

Thomas met last night with Sen. Ben Nelson (D-NE) one-on-one to discuss his ideas for shoring up Social Security. Nelson noted Thomas is promoting "fundamental changes that [are] broader than Social Security." Thomas discussed some specifics regarding his ideas in an April 29 press conference. A recent CBPP report discusses the details mentioned by Thomas, and highlights the fact that Thomas may be looking to use Social Security legislation as a means to push for more tax breaks for the wealthy. The report can be read here.

Last week the Urban-Brookings Tax Policy Center released data on how different options for reforming the estate tax would affect estate tax liablities through 2015. The study looks at five reform options, each with slightly different exemption levels and taxation rates. Click here to see the chart.

Congress recently approved a budget resolution, and now it is up to Senate and House appropriators to write spending bills funding discretionary programs (both defense and domestic). At the same time, other authorizing committees will be working to "find savings" from mandatory programs, as this budget resolution contains reconciliation instructions requiring severe reductions in mandatory spending.

The Coalition on Human Needs has put together a good two-page memo outlining what is in the budget resolution and how it will affect specific mandatory programs. Also see a recent Watcher article for for more information on the budget resolution.

On May 6 the Government Accountability Office sent a letter to Ways and Means Chair Bill Thomas (R-CA) on Social Security reform options. The report provides a list of various reform options, each of which has been scored by the Social Security Administration's Office of the Chief Actuary. The list reflects all provisions that have appeared in SSA proposals in the last few years, and it includes policies that rely on modifying benefits, raising taxes, or overhauling the program to include either payroll tax-funded individual investment accounts or "add-on" accounts financed outside of payroll taxes.

The Ways and Means Committee will be further exploring Social Security reform in hearings in the near future. Although others in his party are wary, Thomas wants to push ahead with work on legislation in June.

Yesterday, House Appropriations Chairman Jerry Lewis released subcommittee discretionary allocations that will result in spending cuts to non-defense domestic programs.

The chairman’s 302(b) allocations will result in actual spending cuts to three of the House’s 11 appropriations bills from current levels — Energy-Water, Interior-Environment, and Labor-HHS-Education — and a spending freeze for Agriculture. As called for in the fiscal 2006 budget, total discretionary spending would increase 2.9 percent to $843 billion. The allocations will not become official until the full committee approves them next week, which is highly likely.

In good news, Lewis respond to broad bipartisan concerns about the future of the Community Development Block Grant program by keeping it within HUD rather than collapsing it into the Commerce Department at reduced levels.

Below are all 11 proposed House subcommittee allocations:

AGRICULTURE: $16.83 billion
DEFENSE: $363.44 billion
ENERGY AND WATER: $29.75 billion
FOREIGN OPERATIONS: $20.27 billion
HOMELAND SECURITY: $30.85 billion INTERIOR: $26.11 billion
LABOR-HHS: $142.51 billion
LEGISLATIVE BRANCH: $3.72 billion
MILITARY QUALITY OF LIFE: $85.16 billion
SCIENCE-STATE-JUSTICE-COMMERCE: $57.45 billion
TRANSPORTATION-TREASURY-HUD: $66.94 billion




Posted by Adam Hughes, 05:16:02 PM



House Adopts Emergency Supplemental Measure

Yesterday the House adopted the conference report on the 2005 emergency supplemental (H.R. 1268) to fund war operations in Iraq and Afghanistan. Next week the Senate will most likely approve the bill as well and it will go to the President for his signature. In clearing the measure, the House narrowly rejected a Democratic effort to add another $284 million in border security funding through a motion to recommit the measure back to conference.

The $82 billion measure appropriates $75.9 billion towards war spending, bringing the total level of war spending since the spring of 2003 to $228.4 billion. See the National Priorities Project for a great breakdown of the cost of the war by state

The President's Advisory Panel on Tax Reform will hold their next two public meetings in Washington, D.C. on May 11 and 12. Both meetings will begin at 9:30 am and will be held in the National Transportation Safety Board Conference Center Auditorium at 429 L'Enfant Plaza, SW, Washington , DC 20594.

The May 11 meeting will focus on specific options for tax reform and the May 12 meeting will focus on business tax reform proposals. A list of witnesses, who will testify on topics such as the value-added tax, the retail sales tax, and business tax reform, can be seen here.



Posted by Becky Lewis, 01:43:43 PM



CBO Says Deficit May Fall in 2005

Yesterday, the Congressional Budget Office released a monthy budget update for FY 2005, in which they said the budget deficit could drop to as low as $350 billion (the deficit last year reached a record-high $412 billion). CBO states this drop is attributable to non-witheld income and payroll tax receipts jumping by 33 percent (the highest rate in four years) and corporate tax receipts jumping 47 percent, increasing overall revenue well beyond projections.

While Republicans claim the CBO estimate means their fiscal policies to reduce deficits are working, Democrats counter the deficit would still be rampant, whether or not it fell, and that continuous deficits are adding to the deterioration of the fiscal health of the nation.

The updated projections that the deficit may drop by $65 billion this year does not alter the fact Bush came into office with a projected 10-year $5.6 trillion surplus and quickly instituted structural deficits through irresponsible tax and spending policies. Despite historically large deficits, the president has continued to push some of the same policies that brought the U.S. so far into the red, including his debt-financed Social Security proposal and extension of the first term tax cuts.

While CBO is predicting in their monthly budget review the budget deficit may be smaller than originally thought, it is important to remember this is a short timeframe. Looking at the effect of the president's tax policies beyond the narrow five-year window included in the congressional budget resolution, we see the costs of those policies explode.

So while news of increased tax receipts is good for a government running large deficits, it is important to remember the future costs of some of Bush's economic policies to put in context the direction the deficit is headed.

House Ways and Means Chairman Bill Thomas (R-CA) spoke about the estate tax yesterday, saying that he would be willing to settle for less than full repeal of the estate tax. "If in fact you're not able to repeal it, the next best thing is certainty," he said.

Thomas also pointed out that his reconciliation tax package may fall well below the $70 billion mark recently laid out in the Congressional budget resolution. $70 billion is the amount the Senate decided upon in their budget plan; the House had settled on a much lower figure of $45 billion. Thomas once again called the tax reconciliation numbers "a ceiling."

The House is expected to give final approval to an $82.04 billion "emergency" supplemental spending bill as early as tomorrow after House and Senate conferees announced they have reached agreement on the details of the legislation needed to fund the wars in Iraq and Afghanistan. The legislation (HR 1268) includes a few additional spending items for tsunami relief, foreign aid, and border security in the southwest U.S.

The final cost is just above the $81.9 billion President Bush urged Congress to appropriate for the spending bill. The figure grew during talks where Lewis was convinced to include some of the money the Senate wanted to address security concerns at U.S. borders, particularly in the Southwest.

The conferees agreed to provide another $75.9 billion for the Pentagon to pursue its military actions in Iraq and Afghanistan. The figure is $1 billion more than Bush asked for, and represents a compromise between the $74.8 billion Senate level and the $76.9 billion sought by the House.

More details on supplemental
OMB Watcher coverage of supplemental
Bush Criticized Over War Budgeting Process

House Republicans, it seems, are split on how to act on Social Security. Some, including Speaker Dennis Hastert (R-IL), want to wait for the Senate to act before moving forward with legislation proposals. Others, such as Tom DeLay (R-TX) and Bill Thomas (R-CA) have indicated that they want to move forward with hearings and legislation more quickly. Click here for more information.

There has been a lot of reaction to the news conference President Bush gave last week. This New York Times editorial discusses how Bush's plan may sound like he is trying to guard poor people from cuts, but that in reality his plan would significantly reduce benefits for millions and millons of Americans. The Center for American Progress and CBPP have also analyzed both the President's plan and Robert Pozen's Progressive Price Indexing Plan. The analyses are below.

Federal Budget

• Congress Passes Irresponsible Budget Resolution
• Despite Public Disdain, Private Accounts Will Not Die
• Bush Criticized for Continuing 'Dishonest' War Budgeting
• Senate Passes Emergency Supplemental; Bill Held Up in Conference
• Economy and Jobs Watch: Economic Recovery Still Shortchanging Workers

On April 28 Congress passed the $2.6 trillion budget resolution. The non-binding agreement between the House and Senate calls for $70 billion in tax cuts protected under reconciliation and $35 in cuts to mandatory programs. While most Republicans note that these strides will begin work towards reducing the deficit, Democrats have cited that the cuts to mandatory programs would significantly cut funding to safety-net programs that many low- moderate-income people rely upon, and that the tax cuts would raise the deficit significantly.

Last friday House Ways and Means Committee chairman Bill Thomas (R-CA) proposed more extreme cuts, and called for the House to make a "far bolder statement" in terms of spending cuts and tax reductions. He said that the spending cut numbers in the budget should be viewed as minimums and not maximums, while the amount set aside for tax cuts (most of which will go to the wealthy) should be viewed as a maximums and not minimums. The final budet resolution included more in tax cuts and less in mandatory savings than the House had originally passed in their resolution.

The tax cut reconciliation bill is slated to be completed in September.

The President's Advisory Panel on Tax Reform is accepting comments regarding ideas on how the tax code should be reformed to be more simple, fair, and more pro-growth.

The Center for American Progress has submitted comments to the tax panel with their ideas concerning responsible tax policy changes. Their letter can be read here. In January of this year the Center put together a tax plan outlining a "progressive approach to tax reform." Their plan raises about $500 billion when compared with the president's policies. Under their plan, 70 percent of the population would receive a tax reduction, while those making over $200,000 per year would see a tax increase. The Center submitted their comments on April 29.

The Tax Reform Panel will hold their next two meetings in Washington, D.C. These public meetings will take place on May 11th and 12th. The meetings will begin at 9:30 and will focus on specific options for tax reform. The location in TBA.