Federal Budget & Tax

Federal Budget & Tax: News Blog Background

Monday, December 20, 2004

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

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

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

Posted by Becky Lewis, 12:26:20 PM

Friday, December 17, 2004

Will Privatization Increase SS Management Fees?

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

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

Posted by Becky Lewis, 03:52:10 PM

Thursday, December 16, 2004

Everything You Want To Know About Social Security And More

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

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

Posted by Becky Lewis, 12:02:03 PM

Wednesday, December 15, 2004

The Social Security Debate, Continued

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

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

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

Posted by Becky Lewis, 04:20:01 PM

Friday, December 10, 2004

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

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

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

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

Posted by Becky Lewis, 10:07:51 AM

Latest Entries by Theme

All Themes

Appropriations & Spending

Federal Tax Policy

Income/Wealth Inequality

Budget Projections

Government Performance