Federal Budget & Tax

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Thursday, May 08, 2008

Monthly Budget Review: April, 2008

Receipts from tax returns filed by the April 15 deadline were about 6 percent higher than such receipts last year, about what CBO anticipated when it prepared its most recent budget projections in March. Nevertheless, the federal government recorded a deficit of $151 billion for the first seven months of fiscal year 2008, CBO estimates—$70 billion more than the shortfall incurred in the same period last year.

...

Because of the large inflow of tax payments due by April 15, the government runs a budget surplus in April. This year, that surplus was $160 billion, CBO estimates, or $17 billion less than the surplus recorded in the same month last year. That reduction was due to the effect of the calendar on the timing of certain outlays.

...

Through April, withholding of income and payroll taxes rose by about $49 billion (or nearly 5 percent), reflecting continued increases in wages and salaries. Those receipts grew at a slower rate than the nearly 7 percent increase recorded in both 2006 and 2007.

CBO: Monthly Budget Review

Posted by Craig Jennings, 03:48:18 PM

Tuesday, April 08, 2008

Monthly Budget Review: March, 2008

CBO estimates that the government incurred a deficit of $310 billion in the first half of 2008. The deficit last year at the same point in time was $258 billion. The $51 billion increase in the deficit through March was largely unaffected by differences in the timing of receipts or expenditures.

A number of programs experienced double-digit percentage increases in spending in the first half of the year—including food and nutrition programs, unemployment benefits, veterans' health care, federal-aid highways, and community development block grants.

Interest on the debt, however, continues to be the fastest growing category of spending.

CBO: Monthly Budget Review

Posted by Craig Jennings, 11:04:33 AM

Wednesday, March 26, 2008

Paulson's Hand Waving Underscores Social Security's Financial Fitness

In a statement by Treasury Secretary Henry Paulson on the 2008 Social Security and Medicare Trust Fund Reports, the Secretary reaches deep to find big bad numbers to support his and the president's call for reform of the Social Security program.

Social Security's unfunded obligation--the difference between the present values of Social Security inflows and outflows less the existing Trust Fund--equals $4.3 trillion over the next 75 years and $13.6 trillion on a permanent basis. To make the system whole on a permanent basis, the combined payroll tax rate would have to be raised immediately by 26 percent (from 12.4 percent to about 15.6 percent), or benefits reduced immediately by 20 percent.

The "permanent basis" to which Paulson is referring is an infinite time horizon. That's right, the report says that a 3.2 percentage point increase in Social Security taxes is required to bring the program into actuarial balance forever. But, the report also says that to bring the program into balance over the next 75 years would require a 1.7 percentage point payroll tax increase - that's about half the increase the Paulson quotes and not quite as scary.

I also want to point out Paulson's citation that to bring the program into actuarial balance on an infinite time horizon would require cutting Social Security benefits today and forever by 20 percent. Immediately cutting benefits by 20 percent to avoid a chance of insolvency would be really stupid, because, as the report points out, when the trust fund is exhausted in 2041 - the date of insolvency - tax revenues will be sufficient to cover 78 percent of promised benefits. Got that? In 2041, we can cut benefits by 22 percent and maintain solvency forever.

Posted by Craig Jennings, 11:06:51 AM

Tuesday, March 25, 2008

Social Security: It's Long-Term Outlook Is Still Just Peachy

In fact, it's getting better. The Social Security Trustees Report for 2008 was released by the Social Security Administration today (it's quite the page-turner). Here are the key facts:

Social Security's "insolvency" date remains the same as last year - 2041. This is the year in which the program's payments will exceed its income.
The year in which program's payments will exceed tax revenues remains unchanged - 2017. This is the year that the trust fund will first be used to make payments to beneficiaries
The actuarial deficit over a 75-year horizon is 1.70 percent of taxable payroll - a 0.26 percentage point reduction from last year. This number represents the combination of increased revenues and decreased benefits as expressed by percent of taxable payroll that is required to avoid insolvency

Also included in the report is the cost of the program over the next 75 years. And as much as certain pundits (I'm looking at you Bob Samuelson!) would like you to believe that Social Security is a large bit of the long term fiscal challenge, the report underscores how small a portion of the Entitlement Crisis^TM Social Security is.

Expressed in relation to the projected gross domestic product (GDP), OASDI cost is estimated to rise from the current level of 4.3 percent of GDP, to 6.0 percent in 2030, and then to decline to 5.8 percent in 2082.

At its peak in 2030, Social Security will cost 1.7 percent of GDP more than it does today - keep in mind, too, that in 2030, Social Security is still solvent. That's not pocket change, but it's not the soul-crushing, economy-killing, puppy-eating monster that Entitlement Crisis^TM Henny Pennys make it out to be. To put into perspective, if President Bush's FY 2008 war supplemental request is fulfilled, that $196 billion would represent about 1.4 percent of current GDP. And while the war is an expensive project, it's hardly bringing the economy to a halt.

The real challenge in the long-term fiscal challenge is still health care costs. Data from GAO's Long Term Fiscal Outlook indicate that Social Security's modest cost increase (4.2 percent of GDP today to 5.3 percent in 2082) is a pittance compared to the growth in Medicare and Medicaid expenditures, which increase from 3.9 percent of GDP today to 13.9 percent in 2082.

Posted by Craig Jennings, 06:19:38 PM

Friday, March 14, 2008

Democrats Pass Budget in House & Senate

The House and Senate successfully passed their versions of the FY 2009 budget resolution yesterday. The House passed their spending outline on a mostly party-line vote 212 - 207 and the Senate passed their version early this morning 51 - 44 (roll call not available yet). Sixteen Democrats in the House opposed the budget along with all Republicans and in the Senate, Sens. Olympia Snowe (R-ME) and Susan Collins (R-ME) supported the budget, while Sen. Evan Bayh (D-IN) opposed it.

The House and Senate versions are similar in a number of areas, but the House blueprint is more fiscally responsible - strictly adhering to PAYGO rules by requiring offsets for mandatory spending increases and any additional tax cuts - particularly offsetting changes to the alternative minimum tax. Way to go House of Representatives!

There were tons of amendments in the Senate all through the day and night on key fiscal issues. We'll be dissecting the amendments and votes throughout the day today here on the BudgetBlog. Stay tuned!

Posted by Adam Hughes, 09:25:16 AM

Thursday, March 06, 2008

Senate Budget Committee Approves FY 2009 Budget Resolution

Voting along party lines - 12-10 -, the Senate Budget Committee has approved its FY 2009 budget resolution. The $3.1 billion resolution includes a one-year, non-offset $62 billion AMT patch. And at $472 billion, its non-defense, domestic top line is 2.2% more than Bush's $462 billion proposal.

Posted by Craig Jennings, 05:27:24 PM

DAILY FISCAL POLICY REPORT -- Mar. 6, 2008

The House budget resolution, legislation and statements

Legislation

Statements

The Senate budget resolution, legislation and statements

Legislation

Statements

Taxes -- House Appropriations Financial Services Subcommittee Chairman Jose Serrano (D-NY) and committee member Rep. Maurice Hinchey (D-NY) will continue their efforts to kill the IRS private tax collection program through fiscal 2009 appropriations.

Contracting -- Sen. John McCain's (R-AZ) role in killing an Air Force deal with Boeing several years ago resurfaces as the row over the Air Forces's decision to contract with Airbus's parent, EADS, for a fleet of new tanker planes

Posted by Craig Jennings, 09:51:43 AM

Monday, March 03, 2008

CBO's Report on Bush's FY09 Budget Projections

Today, the Congressional Budget Office (CBO) released a publication, Preliminary Analysis of the President's Budget Request for 2009, that showed some key differences with the administration regarding budget deficit projections. If enacted, the report indicates, the president's budget would:

produce growing deficits of $396 billion in 2008 and $342 billion in 2009, 2.8 percent and 2.3 percent, respectively, of gross domestic product (GDP). By comparison, the deficit in 2007 totaled 1.2 percent of GDP
result in reduced revenues of $2.1 trillion below CBO's baseline projections over the 2009—2018 period, largely because of proposed extensions of various provisions of the Bush tax cuts of 2001 and 2003

CBO's estimate of discretionary spending for 2009 is $41 billion below that of the Administration. About three-quarters of that difference stems from CBO's lower estimate of defense outlays. In addition, CBO's forecast of lower interest rates for 2009 results in net interest costs that are $43 billion less than the Administration's calculation.

But CBO also estimates that mandatory outlays will be $17 billion above the Administration's total for 2009, with about $10 billion of that amount stems from CBO's higher estimate of unemployment insurance benefits.

CBO's and the Administration's estimates of revenues under the President's policies are nearly identical for 2009.

Posted by Dana Chasin, 03:49:26 PM

Monday, February 25, 2008

State Budgets Getting Worse and Worse and Worse...

The Center on Budget and Policy Priorities continues to churn out updates to their analysis first released in January detailing the increasingly poor state of state budgets around the country, and things are not getting better. The most recent update adds one more state (Oklahoma) to the list of states facing a budget crunch in 2009. Now there are 21 states that are projecting budget gaps in 2009. The updated summary stats from CBPP:

More than half of states anticipate budget problems, according to this updated analysis of state fiscal conditions.

21 states now project budget gaps for 2009. Oklahoma joins this list.

The combined budget shortfall for these 21 states is now at least $36 billion due to changes in the estimates for California and Illinois, and the addition of an estimate for Oklahoma.

4 states say they will have 2009 deficits, but have released no further information. Oklahoma leaves this list because it has now released an estimate.

3 other states project budget gaps for 2010 and beyond.

CBPP: 21 STATES FACE TOTAL BUDGET SHORTFALL OF AT LEAST $36 BILLION IN 2009

Posted by Adam Hughes, 07:59:58 PM

Monday, February 11, 2008

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

Thursday, February 07, 2008

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

Monthly Budget Review: February, 2008

The federal government incurred a deficit of $90 billion in the first four months of fiscal year 2008, CBO estimates, about $48 billion more than the shortfall in the same period last year. Shifts in the timing of certain payments and receipts account for about one-third of that increase in the deficit.
...
The federal government recorded a surplus of $15 billion in January, CBO estimates, less than half the surplus recorded in the same month last year.

Noteworthy is the reason for the uptick in spending: "Spending for net interest on the public debt accounted for the greatest growth, up by about $5 billion (or 30 percent)."

CBO: Monthly Budget Review

Posted by Craig Jennings, 08:50:52 AM

Wednesday, February 06, 2008

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

Bush Weasels Out of Forecasting Another Record Deficit

Had the president used realistic assumptions about economic growth in 2008, yesterday's headlines covering the FY 2009 budget request would have been: "Record Deficit Projected." Instead, the president chose to use a somewhat optimistic GDP growth rate of 2.7 percent, which produces a higher revenue forecast and subsequently lower deficit of $410 billion. If, on the other hand, the president chose to employ the CBO's numbers (GDP growth of 1.7%), the projected deficit for 2008 would have been a jaw-dropping $426.4 billion, significantly surpassing 2004's $413 billion deficit.

There are, however, mitigating circumstances for the president's numbers. In the economic assumptions section, the analytical perspectives volume states (p171):

The [Administration's economic] assumptions are based on information available as of mid-November 2007 and are close to those of the Congressional Budget Office and a consensus of private-sector forecasters...

But that begs the question: The CBO and Blue Chip (i.e. private-sector forecasters) figures reported in the budget documents (table S-10) are from January, so why not use economic forecasts based on the same set of relevant economic data?

So what were the economic experts saying when OMB were making their assumptions for the FY 2009 budget request? In testimony before Congress on Dec. 5^th, CBO Director Peter Orszag told Congress that the Blue Chip forecast was for 2.4 percent GDP growth in 2008 and that the Federal Reserve Board were predicting growth of 1.8 to 2.5 percent. Applying the administration's economic sensitivity data (p177) - a 1 percentage point reduction in GDP growth results in a $13.8 billion drop in revenue and a $2.6 billion increase in spending - to the Fed's high-end 2.5 percent estimate, the projected deficit would be $413.3 billion in 2008 - a tie for largest nominal deficit.

FY 2008 Deficits Under Various Economic Assumptions
Projecting Organization	GDP Growth Rate (percent)	Projected FY 2008 Deficit (billions of dollars)
*Noted in President's Budget*
OMB	2.7	410
CBO	1.7	426
Blue Chip	2.2	419
*Assumptions Cited by Orszag in December Testimony*
Blue Chip	2.4	415
Fed, low	1.8	426
Fed, high	2.5	413

A budget that predicts a record-high deficit would be terribly inconvenient for a president who wishes to be remembered as "fiscally-responsible."

Posted by Craig Jennings, 01:58:38 PM

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

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