Federal Budget & Tax

Federal Budget & Tax: News Blog Background

Thursday, June 30, 2005

House Ways and Means Keeps Talking Private Accounts

Yesterday the House Republican Conference met to discuss a Social Security proposal to create private accounts by using the "Social Security surplus." The House Republicans, who could move a bill as early as July, have called the creation of private accounts one of three parts they would hope would be included in reform legislation; the other two parts would address solvency and private pension security issues.

House Subcommittee on Social Security Chair Jim McCrery (R-LA) said the legislation would "stop the raid on Social Security.... Every penny of payroll taxes will be paid on Social Security benefits." However, the plans discussed so far do not address solvency and will drain money from other government programs. Ways and Means Ranking Member Charles Rangel (D-NY) called the GOP plan "a scam that doesn't stop their raid on Social Security and starts privatization."

House Republicans are also arguing that the GOP bill will increase transparency by exposing the true size of the deficit, since the government won't be able to "borrow" from the surplus anymore to pay down the deficit. In 2004, $155.2 billion of the Social Security surplus was loaned to the government in return for Treasury bonds. Had the government not been able to borrow that money, the deficit would have been $567 billion as opposed to $412 billion (which was a record high as it is). However, if Social Security were simply "on-budget" instead of "off budget," the surplus would not help mask the true size of deficits, because the government wouldn't be able to borrow it in order to pay down the deficit. Therefore, there are other ways of increasing transparency besides the creation of these surplus-funded private accounts.

Posted by Becky Lewis, 12:26:05 PM

Wednesday, June 29, 2005

Smaller Deficit Could Lessen Pressure For Fiscal Discipline

Congressional observers and Wall Street analysts have once again projected down the U.S. fiscal deficit for 2005, with some believing the deficit could be almost $100 billion smaller than the White House's initial projection from January of $427 billion. Increased tax receipts and stronger than projected economic growth have contributed to the smaller deficit projection. Through May, receipts have increased 15.5 percent as compared to the same period in 2003, outpacing a 7.1 percent increase on the spending side, and the economy grew at a rate of 3.8 percent in the first quarter of 2005.

Yet the lower deficit projection is hardly news for celebrating. Even $325 billion - the low mark for projections - would be the third largest deficit in history (the two others, incidentally, were in 2003 and 2004). And despite the better economic numbers, deficits are projected to remain for decades.

The Bush administration has hailed the smaller projections as good news and says it is part of the plan to cut the deficit in half by 2009. What the administration does not say, however, is that after 2009, if current policies stay in place, the deficit will start to rise again. The government is currently running a structural deficit, meaning that no matter how larger our economic growth becomes, the current tax code will not be able to bring in enough revenue to pay for current programs, policies, and priorities. This is due to a lack of a long-term outlook for fiscal planning in the government and lack of discipline among the GOP in Congress to resist yet another round of unpaid-for tax cuts. This trend continues to be troubling.

Posted by Adam Hughes, 11:07:19 AM

Tuesday, June 28, 2005

Bank of International Settlements Issues Warnings in Report

The Bank for International Settlements released their annual report yesterday. In the report (see also a summary), they issued warnings on economic imbalances, the U.S. budget deficit, and dollar depreciation.

The report found that the world economy is marked by increasing internal and external economic imbalances. These imbalances raise serious questions about future global growth and financial stability. The report said, "One simply cannot ignore the number of indicators that are now simultaneously exhibiting marked deviations from historical norms," and went on to warn that the U.S. budget deficit was an increasing concern of global importance. The report basically stated that without any sort of budgetary discipline, the continued decline of the U.S. dollar against other currencies appeared "inevitable."

The report also stated that the U.S. deficit "expanded to a record high as a proportion of GDP [almost 6%], and this in spite of a reduction in the effective real value of the dollar of more than 20% from its peak in early 2002.... It is unprecedented for a reserve currency country to have a current account deficit of such magnitude." The high deficit has resulted in the global financial system seemingly becoming increasingly prone to various sorts of financial turbulence. The Bank of International Settlements is warning Bush and Congress that if deficits continue to rise, there could be serious consequences. Given the current fiscal health of the U.S. economy, now is not the time for Congress and the President to be considering any extremely expensive legislation, without figuring out a way to pay for it.

Posted by Becky Lewis, 11:42:03 AM

Watcher: June 28, 2005

Federal Budget

Posted by Becky Lewis, 10:33:01 AM

Monday, June 27, 2005

Where is the Party of Fiscal Responsibility?

This is an excellent op-ed in today's New York Times by Nicholas Kristof, focused on the debt and the lack of fiscal responsibility which has permeated White House economic policy for the last five years. As Kristof points out, "More than two centuries of American government produced a cumulative national debt of $5.7 trillion when Mr. Bush was elected in 2000. And now that is expected to almost double by 2010, to $10.8 trillion."

There are reasons why we are now so far into debt that three-fourths of the debt have to be purchased by foreigners -- many of them are related to the economic policies passed by the administration and Congress over the last five years. Bush was able to pass his tax cuts of 2001 based on projections of future levels of revenue that proved to be false; yet the tax cuts are still in place, and Congress is calling for more (i.e., repeal of the Alternative Minimum Tax and the Estate Tax).

As the article points out, in a speech Bush gave after presenting his first budget in 2001, he said, "I hope you will join me to pay down $2 trillion in debt during the next 10 years. That is more debt, repaid more quickly, than has ever been repaid by any nation at any time in history." He stated that the U.S. would be "on a glide path toward zero debt." This has turned out to be almost ludicrously false. The debt held by the public is $4.5 trillion today. And each time Bush and Congress pass expensive legislation without figuring out how they are going to pay for it (as they are trying to do with Social Security right now), it only increases this amount. In one of the richest countries in the world, every baby is born tens of thousands of dollars in debt. There is a reason why GAO Comptroller David Walker calls our fiscal irresponsibility "the greatest threat to our future." We are currently on an unsustainable path.

Posted by Becky Lewis, 05:35:05 PM

Friday, June 24, 2005

More on DeMint's Social Security Plan

While the legislation proposed by Sen. DeMint has the support of the Ways and Means Committee, it varies slightly from what the House intends to propose in a bill sometime in the future. Both however, will call for the creation of private accounts. The DeMint legislation, according to aides, would end the prevailing practice of reducing the deficit by the size of the Social Security surplus, since the obligations to the accounts would be treated as regular outlays. The government, however, could continue to spend the surplus on other needs, since the money would be invested in treasury bonds (just as payroll taxes are today). His plan also calls for the creation of an independent board which could offer individuals the opportunity to diversify the accounts into stocks or other investments.

Chairman of the Finance Committee, Sen. Grassley (R-IA), has not yet specifically endorse the DeMint proposal, and it is unclear as of right now how the Finance and Ways and Means Committees will work together to reach a consensus on these ideas. In a statement, Grassley said, "I want to pass legislation that makes Social Security solvent along with personal accounts if possible, and that obviously goes further than this legislation does."

Finance Committee ranking member Max Baucus (D-MT) characterized the DeMint plan as being part of a "bait-and-switch" strategy that will likely see the House approve a private account plan and wrap it in a non-amendable conference report to try to force enactment. House Minority Whip Steny Hoyer (D-MD) released a statement saying the proposal would do nothing to address solvency issues, and "would actually weaken Social Security's solvency by diverting the surpluses that are expected over the next several years and depleting the Social Security Trust Fund even sooner."

Baucus' point has been supported by evidence elsewhere, most notably by Jason Furman of the Center on Budget and Policy Priorities. Furman has stated that the DeMint proposal would drain $600 billion from the Social Security trust fund in the first ten years it is in effect. He stated it will also increase the deficit to nearly $500 billion in 2007. Much of the cost would be administrative, with Furman noting that thousands of new federal employees would be needed to administer the accounts.

Furman presented many of these points and more in his recent testimony before the Ways and Means subcommittee on Social Security.

Posted by Becky Lewis, 12:06:19 PM

Thursday, June 23, 2005

White House Changes Course On Private Accounts

Despite reports yesterday that Sen. DeMint's Social Security plan, GROW, has received the support of the Ways and Means Committee, there are reports today that the White House has enouraged -- and even instructed -- Republican Congressmen to go forward with introducing reform plans which don't include private accounts. Sen. Robert Bennett (R-Utah) said after a White House meeting that the president encouraged him to introduce a Social Security bill that does not include the private accounts. "He indicated I should go forward and do that," Bennett told reporters. Bennett's bill would aim to garner Democratic support. According to news sources, Senate Majority leader Bill Frist (R-TN) refused to comment on these developments.

Posted by Becky Lewis, 01:40:07 PM

Wednesday, June 22, 2005

DeMint and Ways and Means Move Forward with SS Plans

Sen. Jim DeMint (R-SC) has revealed a Social Security proposal which includes private accounts. DeMint's plan is cosponsored by Sen. Santorum (R-PA), Sen. Graham (R-SC), Sen. Crapo (R-ID), and Sen. Coburn (R-OK).

The Ways and Means Committee also unveiled a proposal today which is quite similar to the DeMint plan. The name of the committee's plan is GROW, or "Growing Real Ownership for Workers," and it attempts to paint the creation of private accounts as more worker-friendly than they really are. Under the plan, workers could elect to have their share of the Social Security surplus set aside in a personal account. Critics point out it does nothing to solve the issue of solvency, which is unarguably the biggest problem facing Social Security. Rep. Jim Kolbe stated "If it's an attempt to get us off dead center, to move us forward, that's fine. But it doesn't fix the solvency [problem]: You'd have to borrow the money from some place else."

Posted by Becky Lewis, 05:09:11 PM

Tuesday, June 21, 2005

NY Times Editorial on the Estate Tax

This excellent editorial in the New York Times discusses the conservative push to repeal the estate tax in the Senate. The article says "The mostly Republican supporters of repeal don't have the necessary votes, but are threatening to bring the measure to the floor to force Democrats to vote against it. Democrats, in turn, fear being painted as pro-tax at election time, so would rather broker a compromise than vote against repeal."

However, a bad compromise would be worse than no compromise at all. The article notably points out that irresponsible repeal - such as one that had the exemption level at $3.5 million and the taxable rate at 15% - would end up costing the treasury almost as much as full repeal would (87 percent), and thus is just as harmful.

Posted by Becky Lewis, 01:14:53 PM

House Leads Senate in Work On Approps Bills

While the House is set to finish work all eleven House spending bills by the end of this month, there is pressure on the Senate to figure out a floor strategy to avoid the unruly process that characterized last year's spending negotiations. Next week the Senate is scheduled to work on the Interior-EPA and Homeland Security bills, but after the July Fourth recess the appropriations schedule remains uncertain, according to leadership and committee staff.

This Washington Post article from yesterday looks in depth at the Appropriations Chairman - Sen. Thad Cochran (R-MS) and Rep. Jerry Lewis (R-CA) - and what they are hoping to accomplish during this appropriations cycle.

Posted by Becky Lewis, 01:05:19 PM

Thursday, June 16, 2005

Congress Looks at Proposals to Reform Medicaid

The tough FY 06 budget calls for cuts in most discretionary programs, as well many entitlement programs. Specifically, House and Senate lawmakers have been charged with cutting some $10 billion or more from the Medicaid program. Yesterday, National Governor's Association Chairman Mark Warner (D-VA) and Vice Chairman Mike Huckabee (R-AK) presented their proposals for reform. These proposals are intended to provide Congress with a blueprint as lawmakers work to implement legislation to reduce Medicaid spending.

The proposals suggest improvements to reduce the cost of prescription drugs by increasing rebates from manufacturers, reforms to the Average Wholesale Price system, policies to increase generic drug use, and tiered copayments. In addition, the NGA plan suggests closing loopholes that allow some people to hide or transfer assets to qualify for Medicaid long-term care benefits, increasing cost-sharing for beneficiaries, and implementing judicial reforms to allow states to "locally manage the optional Medicaid categories." Sen. Max Baucus (D-Mont.), ranking member on the Senate Finance Committee, expressed concern about increasing cost-sharing, saying in his opening statement before the committee, "Onerous cost-sharing requirements can harm access to care. While personal responsibility is important, we should not place unduly high barriers to access through changes in cost-sharing."

Congress appears to be a long way from agreement on how to go about reforming Medicaid. The governors have long supported efforts to save more money on prescription drugs; to close loopholes that let people shelter assets to qualify for Medicaid-covered nursing home care, and to encourage the purchase of private long-term care insurance. More contentious are proposals to allow states to require patients to pay for more of their care and what the proposal refers to as "judicial reforms" that would shield states from lawsuits when they change Medicaid programs; both of concern to consumers and consumer advocates.

Posted by Becky Lewis, 07:01:41 PM

House Plans Hearing on Congressional Budget Process

The House Budget Committee announced yesterday that it will hold a hearing on the Congressional budget process. The hearing is scheduled for June 22nd at 10:00 AM in 210 Cannon. Former House Budget Committee Ranking Member Bill Frenzel and University of Maryland School of Public Policy Professor Allen Schick are slated to testify.

Click here for the latest OMB Watcher article on budget process issues.

Posted by Becky Lewis, 06:37:37 PM

Testimony On Government Performance Issues

On Tuesday, there was a hearing before the Senate subcommittee on Federal Financial Management, Government Information, and International Security (a subcommittee of Homeland Security) on performance measures and how they are used in the federal budget process. Dr. Beryl Radin, who has worked extensively on PART and other government performance and management issues, testified before members of the committee, specifically Sens. Carper (D-DE) and Coburn (R-OK). Her testimony can be read here.

Posted by Becky Lewis, 06:23:09 PM

President's Tax Reform Panel Pushes Back Deadline

The President's Advisory Panel on Tax Reform was scheduled to make recommendations to the Treasury Department concerning the tax code on July 31st. The panel announced today that they will be pushing this deadline back to September 30th. Many believe that Congress won't take up reforming the tax code until 2006 (if at all), so the panel feels it has more time to explore specific reforms. Check the panel's website for more information.

Posted by Becky Lewis, 04:18:02 PM

Senate Approps Committee to Mark Up DHS Bill Today

The full Senate Appropriations committee is scheduled to mark up the Homeland Security spending bill today. On Tuesday, the Appropriations subcommittee on Homeland Security reported the bill, and approved $30.8 billion in discretionary funding for FY 06.

Excluding emergency funding and the $2.5 billion in advance appropriations for Project BioShield, the Senate's Homeland Security spending bill weighs in at $1.4 billion more than the FY 2005 enacted spending level, and $1.2 billion more than the administration's request. The House finished work on DHS appropriatons in May, increasing spending $1.37 billion above the FY 05 enacted levels (excluding $2.5 billion in advance appropriations for BioShield), and $1.3 billion above the President’s request.

Posted by Becky Lewis, 01:03:04 PM

Frist Adds ET Repeal Amendment to Energy Bill

From today's TaxAnalysts:

An amendment proposing permanent repeal of the estate tax has been added to an energy bill - the Energy Policy Tax Incentives Act - going to the Senate Finance Committee today, June 16, for markup. The amendment was one of five added by Senate Majority Leader William Frist (R-TN) to the $16 billion energy tax title including 56 total amendments. Although many of the amendments will be withdrawn and others added before reaching the Senate floor, some suspect that Senator Frist will keep the estate tax amendment to obligate Democrats to vote on the contentious issue. Before becoming law, the amendment would have to be approved by the Finance Committee and full Senate as well as survive conference negotiations with the House of Representatives.

Posted by Becky Lewis, 10:50:22 AM

Wednesday, June 15, 2005

Social Security and Pension Hearings

A number of important hearings have taken place this week. Yesterday, the House Ways and Means subcommittee on Social Security held a hearing examining the impact of the American population’s increasing longevity on Social Security’s finances and exploring ways to encourage work at older ages. Members of the panel heard a range of proposals to address the impact of longer-living individuals on solvency. Witness testimonies can be read here.

Also, this morning the Senate Budget committee held a hearing on the solvency of the Pension Benefit Guaranty Corp., which we wrote about in our last issue of the Watcher. The committee heard from Bradley Belt, Director of the PBGC, and CBO head Douglas Holtz-Eakin. The hearing was held because it is clear the defined-pension benefit system needs to be reformed. Rep. Boehner has offered a bill (HR 2830) to overhaul the pension system; however his bill has been criticized by both Republicans and Democrats. Boehner's bill raises pension insurance premiums that companies pay from $19 to $30 to ensure that the PBGC does not need a taxpayer bailout.

Posted by Becky Lewis, 05:49:51 PM

Tuesday, June 14, 2005

Watcher: June 14, 2005
Federal Budget

Posted by Becky Lewis, 11:17:06 AM

Senate Hearing Today on Govt. Accountability and Results

Today at 2:00 pm in Dirksen 562, there is a hearing before the Committee on Homeland Security and Government Affairs regarding accountability and results in federal budgeting. The hearing will focus on the specific metrics and tools (e.g., the Program Assessment Rating Tool, or PART) used by the OMB to determine the effectiveness of federal programs, the advantages and disadvantages of using these metrics, and how information provided by these metrics is being used to increase effectiveness and accountability in federal budgeting.

Witnesses include GAO Comptroller David Walker, OMB Deputy Director Clay Johnson III, Research Fellow on government accountability issues Eileen Norcross, and Professor of Government and Public Administration at the University of Baltimore Dr. Beryl Radin. OMB Watch recently wrote an op-ed on PART, the President's tool for managing federally funded programs. The op-ed finds that FY 2006 budget cuts were made based on ideology?not on a measured, objective system of program evaluation.

Posted by Becky Lewis, 10:46:48 AM

Friday, June 10, 2005

Smith and Conrad Unveil Retirement Savings Bill

Sens. Gordon Smith (R-OR) and Kent Conrad (D-ND) announced yesterday their plans to introduce a Retirement Savings and Security Act, which they could unveil as early as next week. The purpose of the bill is to promote automatic enrollment of workers into company 401(k) plans, in order to minimize the risk of future generations outliving their retirement income. The bill could possibly produce 5.5 million new 401(k) participants over the next five years. The bill would also make changes to the saver's credit, a tax credit for low- and moderate-income workers who contribute to retirement plans and IRAs created under the Economic Growth and Tax Relief Reconciliation Act of 2001. Conrad said, "We think this can and will be passed this year."

Posted by Becky Lewis, 11:39:41 AM

Senate 302(b) Allocations; Defense Allocations Lower

Yesterday the Senate Appropriations Committee approved allocations for the FY 2006 spending bills. The committee is hoping to finish work on all bills by September 30, and avoid a year end omnibus. A total of $842 billion in discretionary funds was allocated to the 12 subcommittees.

The allocations, which were prepared by committee chairman Thad Cochran (R-MS), differ from the levels requested by President Bush, as well as the spending plans developed by the House. In particular, the plan calls for moving billions from the Defense side of the ledger to domestic programs, which are slated for deep cuts in the president's budget. According to the committee, the allocations for the 12 bills will be as follows:

Agriculture at $17.3 billion, up from Bush's $16.9 billion;

Commerce-Justice-State at $48.6 billion, up from Bush's $47.3 billion;

Defense at $400.7 billion, down from Bush's $407.7 billion;

District of Columbia at $593 million, up from Bush's $573 million;

Energy and Water at $31.2 billion, up from Bush's $29.7 billion;

Homeland Security at $30.8 billion, up from Bush's $29.6 billion;

Interior at $26.2 billion, up from Bush's $25.7 billion;

Labor and Health and Human Services at $141.3 billion, the same level as Bush proposed;

Legislative Branch at $3.9 billion, down from Bush's $4 billion;

Military Construction/Veterans Affairs at $44.4 billion, up from Bush's $43.1 billion;

State-Foreign Operations at $31.7 billion, down from Bush's $32.7 billion; and

Transportation-Treasury-HUD at $65.4 billion, up from Bush's $63.1 billion.

Posted by Becky Lewis, 10:43:41 AM

Thursday, June 09, 2005

Another Critic of Bush's SS Plan Comes Forward

Rep. Jim Gerlach (R-PA) has joined the long list of Republican opponents to President Bush's plan to reform Social Security. In a letter to Pennsylvanians United, Gerlach stated, "I am opposed to the President's PRA proposal and my focus is on finding other ways to [resolve the unfunded liability]." (more info here).

Despite continuous opposition, Congressional GOP leaders seem bent on pushing legislation through. Tom DeLay (R-TX) said yesterday that Democrats "are obviously playing politics. They have decided that they're not going to participate and that creates a very difficult approach to getting the bill done." It is obviously not Democrats alone who are refusing to participate in discussions for reforms which include private accounts.

Posted by Becky Lewis, 04:08:52 PM

Tax Policy Should Not Cater to the Wealthy

This June 7 editorial in the New York Times - The Bush Economy - is extremely pertinent to some of the tax reform legislation being considered by Congress right now. The article points out that if all of Bush's tax cuts are made permanent, in ten years people making between $100,000 and $200,000 will pay five to nine percentage points more of their income in federal taxes than those making over $1 million per year. Those making less than $80,000 per year will see their share of taxes rise slightly or stay the same.

As the article says, at this level the tax cuts are about "giving more money to those who have nothing to do with it except amass enormous estates for their heirs." And some of the current legislation being considered by Congress is unfortunately not helping us move in the other direction.

Many Senators, from both sides of the aisle, are currently focusing a good deal of time to discussions on reforming both the estate tax and the alternative minimum tax (AMT). Repeal of the estate tax, which passed the House but most likely doesn't have the 60 votes needed in the Senate, would cost close to a trillion dollars in lost revenue over ten years. (Irresponsible reform could be almost as damaging.) Repeal of the AMT - rather than reform to make the tax more fair - would add nearly $1.2 trillion to deficits and the federal debt over the next ten years, assuming the tax cuts are made permanent.

Lawmakers seem to be jumping at the chance to "fix" fairness issues in our tax system by looking to repeal the estate tax and the AMT. However, these reforms would only further protect the super-wealthy in our society from paying their fair share of taxes, and would leave more of the tax burden on everybody else. Congress should be looking for ways, instead, to raise revenues and constrain spending in order to bring down these unsustainable deficits; which, in the long term, will not only worsen our fiscal situation, but will worsen it disproportionately for the bottom 90 percent of taxpaying Americans.

Posted by Becky Lewis, 11:14:19 AM

Wednesday, June 08, 2005

Senators Discuss Estate Tax Options

Senator Jon Kyl (R-AZ) -- the Senate's point man on estate tax repeal -- told reporters yesterday the estate tax issue will come up on the Senate floor by the end of July, and "maybe... sooner than that." While Senate Republicans do not have the 60 Senate votes necessary to repeal the estate tax, they may have enough votes to pass reform legislation that could be just as harmful. One example of a reform being discussed is increasing the estate tax exemption level significantly, and lowering the tax rate to 15 percent. A reform such as this would cut revenue from the tax significantly, adding to the national deficit.

Notably, Kyl mentioned if he is unable to broker a deal with Democrats, it is possible that estate tax legislation could be added as an amendment to another measure. One Senate aide noted that the energy bill could possibly be used as a vehicle to move estate tax legislation.

Posted by Becky Lewis, 10:33:12 AM

Tuesday, June 07, 2005

CBO Monthly Budget Review

CBO put out their Monthly Budget Review today. This one reports that in the first 8 months of FY 2005, the government incurred a deficit of $273 billion, which is $73 billion less than the recorded shortfall in the first 8 months of FY 2004. This is partially because revenues are up 15 percent, while outlays are only up 7 percent. They have risen $183 billion and $110 billion, respectively.

Corporate income tax receipts are up 48 percent compared with the first 8 months of last year, and this increase primarily reflects a growth in corporate profits in the 2004 calendar year. Notably, spending on Medicare is also up significantly - more than 10 percent - as is spending on farm income-support, nutrition, and education programs, and disaster relief activities administered by the Department of Homeland Security. While the administration's tax and budget policies may appear to be cutting deficits in half, as the President promised, in reality they will end up costing much more in future years. For more info on that, click here.

Posted by Becky Lewis, 05:47:17 PM

Monday, June 06, 2005

The Rich Are Getting Richer

Click here for a great article in yesterday's New York Times about the growing gap in wealth between the richest and the poorest in our society. The very richest are getting richer, while everybody else is left to split the rest of the pie. In the meantime, the Alternative Minimum Tax (which does not affect the super-wealthy as much because it doesn't tax dividends and investment gains) is affecting a greater percentage of the "middle chunk" of the population more every year. The result is that the wealthiest in our society pay far less of a percentage of their income in taxes than the middle - and even moderately wealthy people - do. This article includes some very interesting charts and statistics on wealth trends in this country, and is worth a read.

Posted by Becky Lewis, 05:22:44 PM

Job Growth Lags in May

On Friday the Bureau of Labor Statistics reported that the nation's payroll only expanded by 78,000 in the month of May. This was 100,000 jobs below the expectations of jobs forecasters. This downward trend in May was coupled with other weak economic indicators including continued slow wage growth, losses in manufacturing, and ongoing high levels of long-term unemployment. Despite this low-level of job-growth, unemployment did dip down slightly, from 5.2 percent to 5.1 percent.

Since May 2003, job growth has averaged 147,000 jobs per month. This level, according to the Economic Policy Institute, is enough to sustain the economic recovery, but the overall pattern of job creation over the past two years "suggests that a convincingly strong labor market recovery has yet to take hold." The Center for American Progress notes in this report that no American President since the Great Depression has, until now, sustained a net loss in private-sector jobs 52 months into their presidency.

For more information, click here.

Posted by Becky Lewis, 04:28:40 PM

Thursday, June 02, 2005

Could Progressive Price Indexing Close the Shortfall?

The CBO report on Social Security reform options released last week mentions that the progressive indexing of benefits could completely eliminate the 75-year Social Security shortfall. This projection is even more favorable than the numbers which are being used by the White House in support of the plan. The progressive price indexing plan would index the benefits of the top 30 percent of wages earners by price growth rather than wage growth, index the benefits of the middle 40 percent of wage earners by a combination of wage and price indexing, and index the bottom 30 percent by their current wage-indexing.

One problem however is that CBO's estimates differ from those of the Social Security Actuary, which claims, based on different economic assumptions, that solvency would not be achieved within 75 years. Instead, they claim that even with this plan, the shortfall would only be reduced by 70 percent. (Repealing the 2001 and 2003 tax cuts, on the other hand, would more than make up for the Social Security shortfall -- see this report).

And the Center on Budget and Policy Priorities has recently reported that the SSA's claim that progressive price indexing could shore up 70 percent of the Social Security shortfall, is false. The Pozen progressive price indexing plan calls for reductions in disability and survivorship benefits, which the President has not claimed to support. Their report states, "About one-sixth of the improvement in solvency under the Pozen proposal comes from reductions in disability benefits... A similar amount of the solvency improvement under the Pozen plan is the result of reductions in benefits for survivors." Since the President does not support this, the actual amount of the shortfall which would be closed, the CBPP estimates, would be closer to 59 percent.

Posted by Becky Lewis, 11:45:17 AM

Democrats Voice Opposition to Medicaid Commission

Key Senate and House leaders are rebelling against the administration's request to establish a commission to devise a strategy to reduce Medicaid spending by $10 billion. They are doing so by refusing to participate.

Last week, Rep. John Dingell (D-MI) and Sen. Max Baucus (D-MT) issued the statement, "Unfortunately, the Medicaid Commission proposed by the administration falls short of the unbiased, independent advisory panel proposed by Senators [Gordon] Smith [R-Ore.] and [Jeff] Bingaman [D-N.M.]..... After careful consideration, we have decided not to exercise the opportunity to appoint a Member of Congress to participate as a non-voting member of the Leavitt Commission. Rather, we look forward to working with our colleagues to craft credible, responsible Medicaid policy through upcoming hearings and deliberations in the Senate Committee on Finance, the House Committee on Energy and Commerce, and in Congress." House Minority leader Nancy Pelosi is also refusing to participate, calling the cuts unwarranted and saying the commission should not decide how to achieve those cuts.

Secretary of Health and Human Services Michael Leavitt responded last Friday by announcing that the commission would have 15 voting members appointed by him, 15 non-voting members also appointed by him, and eight non-voting members appointed by Republicans and Democrats in Congress. He plans to submit nominations to serve on the panel by June 3.

The commission is supposed to issue a report by September 1 with suggestions on how to achieve the $10 billion in Medicaid reductions required under the fiscal year 2006 budget resolution. By Dec. 31, 2006, the commission must produce longer-range Medicaid reform recommendations.

Posted by Becky Lewis, 10:20:12 AM

Wednesday, June 01, 2005

Watcher: May 31, 2005

Federal Budget

Posted by Becky Lewis, 05:30:26 PM

Keeping The Focus on Economic Policy

Center for American Progress' John Irons recently wrote an interesting column describing various important budget and economic issues we are currently facing such as the estate tax, entitlement and discretionary cuts, and the cutting of health care for low-income earners. Irons' column suggests that while the fight to save Social Security is important, it is perhaps a tactic being used by the administration to shift some focus and attention away from important budget and economic issues, and on to Social Security. The column can be read here.

Posted by Becky Lewis, 04:30:23 PM

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