Building on yesterday's post, I think the costs that have been shifted are probably larger than first reported. Here's the Congressional Budget Office (CBO) report:

Medicare outlays are expected to rise twice as fast as Social Security spending in 2006 -by 11.8 percent -largely because of the ramping up of the new prescription drug program. That percentage increase from 2005 outlays, however, understates the growth in Medicare spending. A shift in certain payments from October to September 2005 and a legislated delay in payments at the end of this fiscal year have moved an estimated $11.3 billion in Medicare outlays from fiscal year 2006 into 2005 and 2007.

So not only have costs been shifted forward to 2007, but also shifted back to 2005, for a savings of $11.3 billion. That's about $6 billion more than we thought.

UPDATE: I just talked to someone at CBO, and he said that about $4 billion from FY 2006 was shifted to 2005. The money was for HMOs enrolled in the Medicare Advantage Plan. They get paid at the first of the month, or, if the first of the month is on a weekend on a holiday, the last business day before the first of the month. Last year, October 1st was on a Saturday, so the October payment went out in September, which was FY 2005.

He also said that the delayed payments will add up to about $7 billion, not $5.3 billion. All of it together is $11.3 billion, which brings the actual FY 2006 deficit to $271.3 billion.

Also, my suspicion that this gimmick accounted for the drop in entitlement spending this year is probably wrong. CBO said they accounted for both the early 2005 payment and the delayed 2007payment in their March estimate. The official I talked to said they don't know why health care spending dropped, but that they'll probably know in February.

As reported here, last week’s description of this year’s federal deficit by CBO Acting Director Donald Marron’s as “sustainable” provoked the ire of Kent Conrad (D-ND), the ranking Senate Budget Committee member, and John M. Spratt Jr. (D-SC), the ranking House Budget Committee member.

Maron became Acting director when Douglas J. Holtz-Eakin left at the end of 2005, roughly halfway through his term. Amid the stir raised last week by Marron’s comments, the question was raised regarding the tenure of a CBO acting director.

The answer, for now, from Congressional Quarterly (subscription required):

Betsy Holahan, a spokeswoman for Senate Budget Committee Chairman Judd Gregg, R-N.H., said Marron will remain acting director until Holtz-Eakin’s term expires at the start of 2007. CBO directors are appointed jointly by the Speaker of the House and the Senate president pro tempore, but by tradition the choice alternates between the House and Senate Budget chairmen. It’s the Senate’s turn to choose, but Gregg has not made a selection.

This week, CBO released its initially cheery-sounding report that the federal deficit for 2006 would shrink to $260 billion, from $318 billion last year, the lowest level since 2001. Of course, the gloomier long-term fact is that extending President Bush’s tax cuts beyond 2010 and accounting for war and other hidden costs would add $1.75 trillion in debt over the next 10 years and widen annual deficits by about $250 billion from 2011 through 2016.

In particular, according to the New York Times, interest payments on the debt leapt by "almost 20 percent in 2006, to $220 billion, more than what is being spent on Medicaid or on the combined total for all federal income-support programs: unemployment compensation, food stamps, child nutrition programs and the earned-income tax credit” and would accelerate over the next decade, possibly crowding out key budget items.

CBO acting Director Donald B. Marron, who is serving out the unfinished term of former CBO chief Douglas Holtz-Eakin, may have misstepped in blithely noting that the 2006 deficit would come in at around 2 percent of GDP, comparing favorably with deficit over the last 40 years that have averaged about 2.3 percent: "[T]he message I would send is that we've gone from a period in which the fiscal deficits we were running in this country were large and not sustainable if they had persisted, to a situation in which, at least now and for next year, for several years going forward, deficits appear to be in a range that they're sustainable.”

At House and Senate Budget Committee ranking Democrats Rep. Spratt (R-SC) and Sen. Kent Conrad (D-ND), respectively, fired back at Marron.

Said Conrad: “I think it is completely and totally irresponsible. I think it misleads the American people as to the true status of the fiscal condition of the country. We’re in a very unusual situation where the amount of the deficit is a fraction of the increasing debt of the country, and that the debt is going to be what has to be repaid.”

And Spratt: "It disqualifies him, in my mind," from being considered for the job… I would not yet pass judgment on him, but I really thought the statement was uncalled for.”

Surprising in this exchange is the notion that Marron’s tenure may be in question. By statute, Marron is slated to serve out Holtz-Eakin’s term. Watch this space as the war of words continues.

CBO has released its full report on the state of the deficit. It's worth taking a look at.

Today, President Bush will sign another regressive tax cut into law. Yes, ladies and gentleman, I'm talking about the pension reform bill, which happens to not only fix some problems with the Pension Benefit Guaranty Corporation, but also makes permanent a handful of the temporary tax cuts passed in 2001.

The Tax Policy Center, a joint project of the nonpartisan Brookings Institute and Urban Insitute, estimates that the tax cuts will save people in the top income quintile about $368 a year, while people in the bottom quintile get $8.

For you tax wonks, the taxes cut include (from the Tax Policy Center):

• making permanent the pension and IRA provisions in the Economic Growth and Tax Relief Reconcilation Act of 2001 (increased contribution limits and catch-up contributions for IRAs, increased limitation on exclusion for elective deferrals, increased annual addition limitation for defined contribution plans)
• making the Saver's Credit (Subsection (b) of Section 25B of the 1986 Internal Revenue Code) permanent; and
• indexing for inflation the limits for deduction of the retirement contributions for active participants (Section 201(g) of the 1986 Internal Revenue Code), the limits for contribution to ROTH IRAs (Section 408A(c)(3) of the 1986 Internal Revenue Code) and the limit for Saver's Credit (Subsection (b) of Section 25B of the 1986 Internal Revenue Code).

Bloomberg News also has a good summary of the tax breaks.

The Congressional Budget Office (CBO) says the total cost of the bill comes to about $68 billion over ten years. And, of course, the bill does not provide for a way to offset its costs, and it comes at a time when just about everyone and their uncle thinks we're headed for huge, unsustainable, structural deficits.

Earlier, Matt asked:

[A]ny readers out there want to calculate how much lower the deficit would have been if the 2003 capital gains and dividends tax cuts hadn't been in effect?

Well, I'm not sure about the capital gains and dividends cuts, but the Center on Budget and Policy Priotities informs us that:

the tax cuts enacted since January 2001 are costing a total of $258 billion in 2006 (including the increased interest costs of the debt that result from the borrowing that is required to cover the lost revenues). This means that even with the spending for the wars in Iraq and Afghanistan and the response to Hurricane Katrina, the federal budget would essentially be in balance this year if the tax cuts had not been enacted, or if they had been offset by either increases in other taxes or cuts in programs, as would have been required under the Pay-As-You-Go rules that tax-cut proponents first ignored and then allowed to expire.

So, rather than debating where and when to cut Social Security and Medicare, Congress could be seriously debating the merits of an Apollo-like program aimed at moving the U.S. economy away from dependency on fossil fuels.

(Priorities, man, priorities)