New Reports Focus on Current Economic Realities

By guest

Created 10/22/04

The Economic Policy Institute released two studies this week that shed light on how federal economic policies are affecting both the economy and the personal finances of Americans. One study, released on October 19th, is a book titled “Exceptional Returns: Economic, Fiscal, and Social Benefits of Investment in Early Childhood Development.” This study argues that increased investment in Early Childhood Development programs (ECD’s) will have financial payoffs for society in the future.

This study argues that increased investment in Early Childhood Development programs (ECD’s) will have financial payoffs for society in the future. If the government increases spending now to provide quality education and development programs for low-income children in the early stages of life, society will end up paying significantly less in the long run in terms of costs for remedial and special education, criminal justice, and welfare benefits. An added benefit is that once in the labor force, incomes would be up for these individuals, along with the taxes that they would pay back to society.

The study argues that a publicly financed, comprehensive ECD program for all children from low-income families would cost billions of dollars annually, but would create much larger budget savings over time. Specifically, it points out that if a nationwide program were started next year, the budget benefits would exceed costs by $31 billion in 25 years.

Policies that will serve to generate billions of dollars in budget benefits should not be ignored. This month the Congressional Budget Office reported that the final deficit for FY 2004 was $413 billion. This is a $38 billion increase over the FY 2003 deficit, and there is overwhelming skepticism that current fiscal policies can work to reduce this deficit, not to mention our growing national debt. As this report proves, however, spending now on current programs will end up saving society a lot of money in the future. Click here [2] for more information on the deficit.

The Economic Policy Institute released a second report, today, titled “Less Cash in Their Pockets: Trends in Incomes, Wages, Taxes, and Health Spending of Middle-Income Families, 2000-2003.” [1] By examining certain income trends, this report highlights the fact that the economic well being of middle-income families has changed significantly over the last few years; and that specifically, many middle-income families lost ground between 2000 and 2003 and now have less income available to meet their needs.

The report attributes this loss of income to the insufficient rate of job growth over the past few years, growing health care costs for families, as well as the income tax reductions legislated at the federal level during this administration. The authors assess the degree to which the shifts in taxation — the most recent of which includes the massive middle-class tax cut package signed into law earlier this month — have served to offset the recession-induced income losses. Their basic findings center on the point that middle-class families generally have less income available to meet their needs as President Bush comes to the conclusion of four years in office.

Both of these important reports can be found the Institute’s web site, www.epinet.org. [1] Their findings call into question some of the economic policy decisions that have either been made or overlooked by the executive and legislative branches of this country. As we face the highest deficit we’ve ever seen, it is important to keep in mind both how tax cuts really affect the middle class, and what kinds of investments the government can make now to help our economy in the future.

For more information on how the middle class tax cuts really affect the middle class, see this report [1] from the Center on Budget and Policy Priorities.