Federal Budget & Tax

Federal Budget & Tax: News Blog Background

Thursday, February 28, 2008

Jump Ball in Senate on Housing Stimulus
A "Classic Ideological Clash"

The Senate is bracing for a possible cloture vote tonight or early tomorrow on the Foreclosure Prevention Act (text). Senate Majority Leader Harry Reid (D-NV) has written a letter urging President Bush to reverse his veto threat against the housing stimulus package.

"Why don't we let stimulus package one, which seemed like a good idea at the time, have a chance to kick in?" Bush replied today, fueling what the New York Times is calling "a classic ideological clash." Nevertheless, GOP leaders in the Senate are reportedly scheduled to unveil their own version of a housing stimulus bill.

Stay tuned.

UPDATE: The cloture motion to bring the Foreclosure Prevention Act to a vote has failed, 48-46 (60 votes required).

Posted by Dana Chasin, 05:37:53 PM

Alternative Route for Energy Bill: Tax Reconciliation

Senate Budget Committee Chair Kent Conrad (D-ND) has outlined an alternative route to Senate passage for the alternative energy tax incentive bill described below. Including these tax provisions in the budget reconciliation instructions allows them to pass the Senate with a simple majority vote, rather than the usual 60 votes needed to avoid a filibuster.

A similar energy tax incentives bill died in the Senate last December after controversy over the offsets to pay for it left the bill one vote shy of the 60 needed for a vote.

Another sticking point in the Senate: the bill's elimination of some major oil and gas company tax breaks.

Posted by Dana Chasin, 10:41:19 AM

Legislation in Gestation: Back to the Fiscal Future
Memo to the 111th Congress

By a 236-182 vote yesterday, the House passed the Renewable Energy and Energy Conservation Tax Act of 2008, an $18.1 billion package that extends three key renewable energy tax credits that expire at the end of 2008, creates a new tax credit of 50 cents per gallon for producing cellulosic ethanol, and establishes a $4,000 tax credit for plug-in hybrid vehicles. See JCT summary of provisions and scoring.

The bill is fully offset, mostly by a provision denying the Section 199 manufacturing deduction to certain oil and gas producers, a change that would raise $13.57 billion. Of course, as we have noted, President Bush has threatened/promised to veto the bill, in large part because it cuts out this sizable tax break for oil and gas companies. Similar legislation died in the Senate last year.

Is this an exercise in futility? Not at all. While the outcome of the year's elections cannot be presumed, there is reason to believe that this bill could easily become law in changed political circumstances. This could be true to of a number of other fiscal measures otherwise DOA in '08, such as legislation to:

codify the economic substance doctrine
close the carried interest tax loophole
end offshore deferred compensation
expand the children's health insurance program
expand Trade Adjustment Assistance

By the end of the year, Congress, or a chamber thereof, could have passed a raft of fiscal bills ready to roll in the 111th Congress.

Presto -- just add President.

Posted by Dana Chasin, 10:08:13 AM

Wednesday, February 27, 2008

Why Does ExxonMobil Get Tax Breaks?

Following up on Dana's blog last night about President Bush's promised veto of energy legislation moving through Congress, Donny Shaw over at Open Congress provides an excellent rundown of the key arguments from opposing sides on this bill. The main reason the legislation has generated so much controversy is that it would repeal tax breaks for oil and gas companies who drill on public-owned coastal waters.

What is disturbing is that the tax incentives given to the oil and gas companies don't work. A New York Times article from 2006 details an report produced by the Department of the Interior that found the incentives would only marginally increase production of oil and gas over the next 40 years or so - about 300 million barrels (or about 1 percent) more over that time than if the incentives did not exist. Increases in gas production would be even less - closer to half of one percent. But the costs are enormous - between $40 and $50 billion less in royalty payments to the government for drilling on public land. And as we've noted before (here and here) the Department of the Interior has already screwed up collecting the royalties it should receive under this program, allowing oil and gas companies to keep tens of billions of dollars that should have been put to public use - not private profit.

And those profits are still rolling in. Most large energy companies who benefit from this tax break are not hard up for cash to invest in drilling and expansion of production, particularly oil companies. ExxonMobil made over $40 billion in profit in 2007 - the most ever by a U.S. company. Do we really need to be mitigating the risk for oil exploration for a company so flush with cash that is almost definitely going to explore anyway? Is that the best use of federal resources that belong to us all?

The president's veto threat also brings into question his often-stated goal that the federal government should not spend public dollars on program that don't show results. This particular program has shown, based on the government's own studies, to be wasteful and unsuccessful. Why then is Mr. Bush threatening to veto a bill ending the program and shifting those resources to generating production of reneweable energy? (Btw, the oil and gas industry contributed $2,596,725 to the president's 2004 campaign in total. Hmmm...)

Image by Flickr user xitus used under a Creative Commons license

Posted by Adam Hughes, 11:43:59 AM

Tuesday, February 26, 2008

Bush Admin. Threatens Vetoes of Housing, Energy Bills
Veni, Vedi ... Veti?

(Q: What is the plural of veto? Answer below)

Today, the Bush administration issued formal veto threats of two bills pending in Congress:

The Foreclosure Prevention Act of 2008 (S. 2636) provides $200 million for pre-foreclosure counselling, allowance for state housing finance authorities to issue $10 billion in additional mortgage revenue bonds to refinance subprime loans and provide mortgages for first-time home buyers, and court-supervised modification of home mortgages in bankruptcy --a last provision that has sparked the most controversy -- indeed, it raises some thorney constitutional questions -- and the strongest objection from the White House
The Renewable Energy and Energy Conservation Tax Act (H.R. 5351) provides $18.5 billion for several renewable and efficiency measures, including increased motor vehicle fuel economy standards and a sustainable biofuels mandate, offset entirely, funded mostly by eliminating some of the tax breaks for large oil companies (bill summary). "Industries should be taxed on a level playing field, and that field should be leveled by lowering rates, not by raising them," the White House said, in its veto threat of the bill

(A: a trick question -- there is no plural of veto; it's a verb, silly!)

Posted by Dana Chasin, 07:02:03 PM

Friday, February 22, 2008

DAILY FISCAL POLICY REVIEW -- 02-22-08

Stimulus 2.0 -- Senate to Consider Housing Package: Majority Leader Reid may bring a housing-oriented 'stimulus' package to the Senate floor with a vote perhaps sometime next week... The housing piece looks like a grab-bag of provisions:

a controversial bankruptcy law revision allowing judges to alter home mortgage terms
increased caps on state mortgage-revenue bonds
tax breaks for homebuilders

[Query: what makes this a stimulus package? A PAYGO waiver?]

Budget -- $20 bn. Real Domestic Discretionary Cap Cut: A Center on Budget report shows that President Bush's proposed Y09 domestic discretionary spending cap amounts to a $20.5 billion cut in real terms... It would mean sizable cumulative cuts in:

K-12 Education — 9.1 percent below its 2004 level
Head Start — 12 percent below its 2002 level
Repairing and Modernizing Public Housing — 45 percent below its 2001 level
Low-Income Energy Assistance — 22 percent below its 2008 level
Environmental Protection — 26 percent below its 2001 level

Posted by Dana Chasin, 11:59:20 AM

Wednesday, February 13, 2008

When Bush and Congress Agree -- Catastrophe!

President Bush signed the economic stimulus package this afternoon. Bipartisanship reigns. Whoopee. The White House transcript is here. Raise your hand if you're not breaking out the champagne. The lard-up was not as bad as it could have been. But the fundamentals of stimulus-palooza were wrong at the start and wrong at the signing. Borrow and spend may be good politics, but it is bad policy. Hillary wins.
-- Michelle Malkin

Let's be honest, Congress ($160 bn. spent) was far more generous than Hillary ($110 bn. proposed). So it'd be nice to know: why does Michelle think it's bad policy (she neglects to say) and how does Hillary uniquely win in this (or is that her non sequitor prediction for November)?

P.S., the White House transcript is unilluminating, or I'd have linked to it.

Posted by Dana Chasin, 08:00:14 PM

OMB Watch up for Online Advocacy Award

Do you like OMB Watch? Would you like to boost our fragile self-esteem? Then please vote for us in the Golden Dot Awards, presented annually for excellence in online campaigning by the Institute for Politics, Democracy & the Internet at George Washington University.

OMB Watch has been nominated for Best Issue Advocacy Blog. The nomination is for all three of our blogs: Advocacy Blog, Budget Blog, and Reg•Watch.

Vote here: polc.ipdi.org/GoldenDots/voting.htm

(OMB Watch has the utmost respect for the other candidates and has vowed to run a clean campaign.)

Posted by Matt Madia, 05:23:53 PM

Stimulus Signed -- What's in it for You?
Keep Your Eyes on the Prize and the Size of the Stimulus

This afternoon, President Bush signed the ballyhooed bipartisan bill that will provide a hundred billion bucks to Americans and, as a bonus, might simultaneously serve to stimulate the stagnant economy, so long it sparks spending on consumer items.

What does this mean for you? Do you get a rebate under the plan and, if so, how much of one? How do you sign up?

OMB Watch breaks it down and shows you what's it in for you: here
How to make sure you get your rebate check: here
IRS Facts About the 2008 Stimulus Payments: here
Stimulus Payments: Instructions for Low-Income Workers and Recipients of Social Security and Certain Veterans' Benefits: here

Posted by Dana Chasin, 02:59:28 PM

Monday, February 11, 2008

Economic Report of the President Released
A Part-Useful, Part-Sententious Document

Today, the president's Council of Economic Advisers released the administration's annual report on the economy. The Report serves as much an account and forecast of the nation's ominous economic conditions -- where it is a highly relevant and even useful document -- as a lobbying effort on behalf of extending the administration's tax reductions in 2001 and 2003.

The Report argues that '01/'03 cuts considerably lowered the tax burden on labor and capital income and reduced distortions to economic decisions. The cuts "improved the efficiency of the tax structure primarily by reducing the double taxation of corporate income."

Text of the Economic Report of the President is available here.

Posted by Dana Chasin, 03:07:33 PM

Mentioning the Unmentionable

Writing in The Wall Street Journal, Jesse Drucker notes($) that the full cost of the recently-passed economic stimulus package is slightly underestimated by the Joint Committee on Taxation's score:

A round of business tax cuts in Congress's economic-stimulus package passed Thursday will cost nearly triple the official government estimate, tax experts said.

The tax breaks in the package will cost more than $22 billion over the next 11 years, or roughly $15 billion more than the government's long-term estimate of $7.5 billion. To put that additional $1.4 billion cost a year into context, it is the same as the annual budget of the federal National Institute of Mental Health.

...

...the U.S. Treasury must borrow to make up for the lost revenue. These interest costs over the next decade will triple the estimated long-term cost of the proposed business tax cuts, according to an analysis done by tax experts at the request of The Wall Street Journal.

And as interest expense on the national debt is the fastest growing component of the federal budget, prominent mention of interest expenses in spending and taxation debates would portray a much clearer picture of the nation's finances. So, we've put together a proposal that would impose a statutory requirement on the Joint Committee on Taxation to include interest expenses in its scorings, with the belief that budgetary decision making would be much improved when legislators have ready access to information on the interest expense of any budgetary legislation.

Posted by Craig Jennings, 01:22:46 PM

Bush Budget Continues to Disappoint

President Bush's FY 2009 budget continues to receive poor reviews into its second week. We reviewed a number of those reactions last week (see our summary posts here and here), and below are some additional disappointed reviews:

The Daily Tar Heel: Budget May Cut Student Loans
BlackAmericaWeb: Reading Is Fundamental's Program Target of Major Cuts
Center for American Progress: Bush's Budget Cuts Aid to Displaced Workers
The Buffalo News: Bush Budget Disappoints
Washington Post: No Funds in Bush Budget For Troop-Benefits Plan
WP's Stephen Barr: Social Security, DHS Say Bush's Budget Falls Short

Posted by Adam Hughes, 12:20:59 PM

Friday, February 08, 2008

Mechanics of the Stimulus Plan
The A-B-C's of How it Works

The stimulus package passed by Congress yesterday operates fairly simply. Here's what you need to know:

TAX REBATES: all eligible citizens will receive up to $600 per individual and $1,200 per married couple, with a minimum of $300 per single and $600 per couple plus an additional $300 per child
ELIGIBILITY: 35 million individuals and families who received at least $3,000 in 2007 in wages and social security/disability payments, including payments to survivors of disabled veterans, will be eligible for the rebate checks
INELIGIBLE: Because they do not have valid social security numbers, undocumented workers cannot get rebates
PHASE OUT: The rebates begin to phase out above incomes of $75,000 for a single filer and $150,000 for a married couple, with rebate amounts reduced by 10 percent for each additional $5,000 in income
TIMING: Rebate checks will probably be sent out as early as mid-May
BENEFITS FOR BUSINESS: The plan 1) doubles the amount small businesses can immediately write off their taxes for capital investments made in 2008 from $125,000 to $250,000, for purchases of new equipment of up to $800,000 (from $500,000); 2) speeds up depreciation provisions, so that firms can write off an additional 50 percent for investments purchased in 2008
WHAT'S NEXT?: If an extended recession ensues, Congress is likely todevelop a plan of further assistance, which could include extension of unemployment benefits, Food Stamps, state and local assistance and Medicaid

Posted by Dana Chasin, 12:41:52 PM

Thursday, February 07, 2008

Senate Adopts Modestly Expanded Stimulus Bill

Moments ago, the U.S. Senate passed a $152 billion ($168 billion over two years) stimulus package along the lines described below, by an 81-16 vote. The House is expected to adopt an indentical measure, perhaps as soon as this evening, and send it to the president for his signature.

Posted by Dana Chasin, 05:20:19 PM

More Reactions/Analysis of President's Budget

More reactions and analysis of the president's budget have emerged since our first round-up post on Tuesday:

CBPP: President's Budget and Medicare "Trigger"
NWLC: Budget Woes: President's FY 2009 Budget
Committee for a Responsible Federal Budget: The President's FY 2009 Budget
The Workforce Alliance: FY 2009 Federal Funding Analyses

There have also been a number of statements and analyses circulated from Capitol Hill:

Senate Budget Committee Dems: Brief Analysis of Bush FY 2009 Budget
Sen. Conrad (D-ND): Statement on FY 2009 Budget Release
Majority Leader Hoyer (D-MD): Bush's Legacy: Fiscal Meltdown, Weak Economy
House Budget Committee: State-by-State Analysis of President's FY 2009 Budget Request
Speaker Pelosi (D-CA): Statement on President Bush's FY 2009 Budget
Majority Leader Hoyer: Statement on Bush's Release of Another Fiscally Irresponsible Budget
Sen. Gregg (R-NH): Statement on FY 2009 Budget Release
Senate Budget Committee Repubs: Overview of President's Budget

Posted by Adam Hughes, 11:31:41 AM

Stimulus Stalled in Senate by Single Vote

By a 58-41 vote last night, the Senate fell one vote short of invoking cloture on the stimulus package passed last week by the Finance Committee. Majority leader Harry Reid (D-NV) lost his bid to pass a broader package than was passed by the House on Jan. 29. Reid had told his GOP colleagues that the vote would be their one-and-only chance to vote on a stimulus package, but he is virtually certain to hold a vote in the coming days on a pared down version of the Finance Committee bill.

Last night's margin could not have been closer. With 51 Democratic votes, Reid needed support from nine GOP colleagues to prevail. He got eight: Norm Coleman (MN), Susan Collins (ME), Elizabeth Dole (NC), Pete Domenici (NM), Charles Grassley (IA), Gordon Smith (OR), Olympia Snowe (ME), and Arlen Specter (PA).

Yesterday's CBO cost estimates of the House and Senate bills -- neither of which is paid for -- makes clear the difference in their price tags. Over FY08-09:

the House bill costs $161 billion -- $146 billion in lost revenue; $15 billion in increased spending
the Senate Finance bill costs $204 billion -- $136 billion in lost revenue; $68 billion in increased spending (rebates exceeding individuals' income tax liability are classified as direct spending)

Posted by Dana Chasin, 11:12:55 AM

Wednesday, February 06, 2008

Senate Shoot-Out at Stimulus Corral

With neither side certain of the outcome, the Senate will hold a cloture vote (basically, on whether to proceed to a vote) on an expanded version of the fiscal stimulus package approved last week by the Finance Committee.

Senate Majority Leader Harry Reid (D-NV) is betting that he can pick up enough GOP votes to stop a filibuster of the package, believing that with about 20 incumbent GOP senators seeking re-election this year, a nearly $200 billion stimulus plan that will provide cash relief to over 20 million seniors and disabled vets, extend unemployment insurance, and include low-income home heating assistance may well be too popular to oppose (see Sen. Sununu (R-NH), for example).

At the same time, Senate Minority Leader Mitch McConnell knows that Reid needs to find a total of nine GOP votes to invoke cloture and move to a vote on the package. He also knows that the Senate-passed package will not be the final word, as it will then move into conference with the more streamlined $146 billion House-administration stimulus plan.

Posted by Dana Chasin, 02:04:53 PM

Bush Breaks His Record For Tiniest Budget Yet

Since the president's FY 2009 budget request was mostly a rehash of old policies and proposals we've already spent time debunking in previous years, we've been looking for some new angles with which to view the president's budget. As I was sitting at my desk looking at the budget books in my office, the actual length of the main budget volume released this year jumped out at me. Or I should say, it didn't jump out at me.

Turns out the main budget book for the FY 2009 budget is the shortest one ever released by the president. At 170 pages, it is more than 45 percent shorter than the average length of the budget book released each year by President Bush (which came in at 311 pages.

Not sure what one can make of this change, particularly since the FY 2008 budget is also much shorter than the Bush average. This particular part of the president's budget proposal has evolved during the Bush administration to be a fancy, glossy, picture-filed advertisement for the administration's achievements and priorities, with little hard budgetary information. It is developed, I suppose, to help the administration put the best spin on their budget proposal and successes.

I wonder if the Bush administration is tired of actively selling their misguided priorities, particularly in this final year and that is the reason for the shorter volume? Or perhaps they have realized they really don't have many budget achievements that they should be bragging about?

Posted by Adam Hughes, 09:32:53 AM

Tuesday, February 05, 2008

Reactions to Bush's Budget Begin to Appear

The day after President Bush released his $3.1 trillion budget for FY 2009, analysts and advocacy groups have begun to roll out reactions and statements on the proposal. Below are a few out so far:

CBPP: Federal Grants to State and Localities Cut Deeply
CBPP: The Dubious Priorities of the President's Budget
FRAC: Statement on Nutrition Program Changes in Budget
NWLC: Bush Budget Locks in Gains for the Rich, Short Changes Women and Families

We'll post more statements and analyses as they are released. OMB Watch's overview of the budget will be released this afternoon in the next edition of The Watcher (Sign up here if you don't receive The Watcher).

Posted by Adam Hughes, 09:57:56 AM

Friday, February 01, 2008

The Jobs Picture: A Recession by Any Other Name

The steady stream of bad economic news continued into February with the release today of the Bureau of Labor Statistics' employment report showing that the U.S. economy lost 17,000 jobs in January, for the first monthly net job loss in 53 months. The weekly jobless claims figures for the week ending Jan. 26 jumped by 69,000 to 375,000, the largest increase in over 120 weeks.

But there's good news, too! A column in U.S. News & World Report today reveals that we still have only a 6 percent risk of recession.

Here are the obscure but cheery facts:

In this morning's BLS Employment Situation report for Jan 2008, the unemployment rate is 4.9 percent. Therefore the new employment-based recession probability index (RPI) is 0.060 (or 6.0%). The RPI is a combination of the two most valuable employment indicators of a recession's early stages: weekly initial unemployment insurance (UI) claims and the unemployment rate. The 4-week moving average of initial UI claims was reported yesterday at 325,750, which is 17,000 lower than 4 weeks ago and essentially unchanged from the October average. Alone, trends in UI claims suggest a 4 percent recession probability. The unemployment rate is 0.1 points lower than December, but 0.1 higher than three months ago, suggesting an 8 percent recession probability. Combined, this yields an overall recession probability of 6 percent.

Don't you feel better already?

Imagine voting against an extension of unemployment benefits for the unemployed in the face of these numbers.

Posted by Dana Chasin, 01:51:05 PM

Latest Entries by Theme

All Themes

Appropriations & Spending

Federal Tax Policy

Income/Wealth Inequality

Budget Projections

Government Performance

Estate Tax

State Fiscal Policy