The Commerce Department reported today the economy grew by 4.1 percent in the fourth quarter, despite surging energy prices. Business growth was slightly lower than the government had previously estimated it would be. This growth was attributed to high consumer demand, especially for cars, as well as business investment.

Despite this economic upswing, it would be misleading to ignore current economic weaknesses, and instead point to GOP tax cutting as the reason for economic success. Yes, GDP growth has been solid over the last few years, but as Gene Sperling discusses in this article on ThinkProgress.org, the growth does not necessarily mean all is well with the economy. In terms of employment growth, for example, our current economic recovery is the weakest ever recorded. Also, the poverty rate has risen each year Bush has been in office. 5.4 million people have fallen into poverty since 2000, making this the only recovery on record where poverty has increased from the second year to the third year after the recession. Finally, the personal savings rate has has hit a rock bottom -2.18 percent (recorded in August). This level of negative savings has not been seen since the Great Depression. So while GDP is on the rise, it is important not to ignore the other economic factors which measure just how well the average person in society is faring.

Economy Grows at Fastest Pace in 1 1/2 years

The tax gap is the gap between personal income and adjusted gross income (AGI), and it is currently the highest it has been in 46 years worth of data analyzed by the Bureau of Economic Analysis.

AGI is the key before-tax definition of income, used by the IRS in the calculation of individual income tax liabilities, while personal income is often used in examining trends in national economic output, consumer spending, saving, and investment. In other words, the tax gap is the difference between the amount of money people actually have, and the amount of money they say they have in their tax returns. The gap is currently at 14.4%, and is up from 10.7% in 2000.

On Friday, the House and Senate approved by unanimous consent a package of tax breaks (H.R. 4440) that are meant to help individuals and businesses in the Gulf Coast region. The Senate accepted the House's decision to exclude casino's and liquor stores from the tax measure, which provides a bonus depreciation deduction for property in the Gulf, as well as a carryback of net operating losses. Thte Joint Committee on Taxation scored the cost of the bill at about $7.8 billion over five years.

The Congressional Budget Office released their Long-term Budget Outlook today, in which they noted

Even if taxation reached levels that were unprecedented in the United States, current spending policies could become financially unsustainable. An evergrowing burden of federal debt held by the public would have a corrosive and potentially contractionary effect on the economy.

And although this administration has been touting their economic growth lately, the CBO points out that economic growth itself is "unlikely" to bring the nation's long-term fiscal position into balance, especially if we accrue ever-larger amounts of debt.

We have been saying a lot lately that Congressional GOP budget and tax policies look out for the wealthy by providing them with tax cuts, while at the same time hurt the poor by robbing social programs of funding in the name of fiscal responsibility and deficit reduction. While this is true, there is more to the picture. As Josh Lynn and Robert Gordon have recently discussed at Think Progress and in the American Prospect, the latest GOP policies are also responsible for discouraging hard work and self-reliance - two ideals endlessly promoted in conservative rhetoric. Lynn and Gordon write

[the cuts] to Medicaid, food stamps, and child care, for starters — punish working Americans by undermining incentives to hold down a job, or by essentially classifying them as “too rich” to collect assistance.

Additionally, the tax burden is blatantly being shifted from capital to labor, as witnessed by the House's recent passage of the tax reconciliation bill extending low capital gains and dividends rates. Policies such as these reward wealth while making it harder for the average working family to pay the bills.

Posted by Becky Lewis, 06:17:59 PM



House Passes Labor/HHS Bill; ANWR Attached To Defense Bill

The House passed a $602 billion Labor/HHS Appropriations bill yesterday by a close vote of 215-213, nearly one month after twenty-two Republicans surprisingly voted with Democrats to defeat the initial bill that came out of conference. In the vote, all Democrats and only 12 Republicans voted against the bill, which provides $142.5 billion in discretionary funding (the remainder is automatic spending on entitlement programs). This discretionary amount is 0.1 percent - or $163 million - less than what was appropriated for FY 2005, and $785 million more than President Bush’s budget request.

In order to pick up support for the bill, appropriators increased rural health spending by $90 million and, in a nod to Rep. Bill Thomas (R-CA), struck a provision barring Medicare coverage of erectile dysfunction drugs. The overall cost of the bill did not change, however, because money added was offset by a $120 million reduction to an HHS vaccine fund.

The Senate will most likely clear the measure later today, even though there is widespread bipartisan dissatisfaction with this bill, which is the most austere Labor/HHS bill seen in decades. Overall, the bill cuts nearly $1.5 billion from the FY05 levels; however, if a 1 percent across-the-board cut is implemented later this week (as is being pushed by GOP leaders like Dennis Hastert (R-IL), total cuts would approach $3 billion.

Arlen Specter (R-PA), chairman of the Senate Labor-HHS-Education Appropriations Subcommittee, said that even though the measure provides insufficient funding for major health and school programs, he expects it to pass. He said, "I will vote for it if my vote is needed to pass, otherwise I will vote against. There is not enough money in it."

In other appropriations news, Sen. Ted Stevens (R-AK) - the Senate's biggest proponent of opening up the Arctic National Wildlife Refuge for drilling - has attached the ANWR provision to the Defense appropriations bill. The defense bill also includes funding for hurricane disaster relief, and Stevens, who is the chair of the Senate Defense Appropriations Subcommittee said, "It’s going to be awfully hard to vote against Katrina [disaster assistance]. . . . If it’s in there, then maybe those disaster people — area people — will vote with me on ANWR." This move will also likely clear the way for Congress to pass a roughly $42 billion deficit reduction reconciliation bill that was being held up partially over ANWR language.

Stevens has had some difficulty amassing support for ANWR, particularly from House Republicans, a number of whom refused to vote for their version of the budget reconciliation bill until the leadership removed ANWR language from the measure.

Posted by Becky Lewis, 03:30:33 PM

Tuesday, December 13, 2005

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