September 1, 2014

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Sunday, September 5, 2010 - 9:54 PM

The Obama Administration is now considering a new set of tax cuts, primarily aimed at businesses, to further stimulate the economy.  It's reported that a permanent extension of the research and experimentation tax credit is one of these new proposals.  This is just the latest sign that the Administration is stuck in its own "deficit-financed tax cuts box."

My first complaint about these new ideas for tax cuts is that they're not really new at all; they're repeats of essentially permanent tax cuts that are repeatedly renewed.  They are "temporary" in name only. The administration seems to have adopted the mindset that many policymakers in Congress (and not exclusively those from one side of the aisle) have long had -- that the prescription for any kind of economic ailment should be more deficit-financed tax cuts.  But given the fiscal and economic outlook, and how the CBO explains they interact over the longer term (large deficits reducing economic growth), there's no justification for deficit financing permanent tax cuts. That's true even for tax cuts that may be good for longer-term growth (via the supply side of the economy) like the research tax credit.  Deficit-financing is only justified for policies that are designed to effectively and immediately boost...

Monday, August 23, 2010 - 2:17 PM

One of my Concord colleagues recently relayed the following "old joke" to me, remarking that a fiscal policy issue we had been discussing reminded him of it.  But when he said it, it reminded me instead of a different fiscal policy issue (and my favorite): the Bush tax cuts and the impending "fork in the road" for them -- whether they will largely endure as the "Obama tax cuts," or whether they will be allowed to expire as scheduled under current law, at least partially and/or eventually.

"Could you loan me ten dollars but just give me five? That way you'll owe me five, I'll owe you five, and we'll be even."

Conveniently, last week the Congressional Budget Office released their update to their budget and economic outlook, so I have some updated numbers for my Bush/Obama tax cuts version of that joke:

President Obama: "Could you loan me ten dollars $2.65 trillion for 10 years' worth of all of the Bush tax cuts but just give me five...

Monday, August 2, 2010 - 10:58 AM

Below are several developments we have been following since the last edition of the Washington Budget Report (sign up here) was published.

FY 2011 APPROPRIATIONS:  Prior to departing for the August recess, the House passed the first two FY 2011 appropriations bills. The Military Construction-Veterans Affairs bill passed by a vote of 411-6 and the Transportation-HUD bill passed by a vote of 251-167. House subcommittees reported the...

Wednesday, June 16, 2010 - 1:23 PM

Debate on the so-called “extenders” bill has focused on the size and duration of unemployment benefits, health insurance assistance for those who recently lost their jobs, Medicare physician payments, state aid for health care and various offsets to mitigate the overall effect on the deficit.

Conspicuously missing from the debate is any scrutiny of the extenders themselves. It’s a missed opportunity to raise needed revenue while simplifying the tax code and broadening the tax base -- goals that economists of all ideological stripes have long advocated. 

Both the House and Senate versions of the extenders bill contain more than 60 narrowly targeted tax breaks that expired last year. Extending them just through this year will cost about $32 billion. The long-term cost runs to over $350 billion. That cost will add to the debt unless it is offset by corresponding tax increases or spending cuts that may prove more harmful to the economy than failing to renew some, or all, of the extenders. 

At a time when the President is commendably urging all federal agencies to identify their lowest priority and least effective items, Congress should devote the same level of scrutiny to the tax code. The extenders would be a good place to...

Monday, June 7, 2010 - 4:34 PM

Public concern about the nation’s rising debt burden is beginning to have an impact on the legislative agenda.  

That much was evident as the House passed a scaled back “extenders” bill (H.R. 4213) on May 28 by a slim margin. Originally estimated to have a gross cost of $192 billion and a net deficit increase of $134 billion, the final bill carried a gross cost of $114 billion and a net deficit increase of $54 billion.

While this cost reduction was a victory for House Democrats -- mainly Blue Dogs -- who objected to the deficit impact of the original bill, much of it was accomplished by timing shifts rather than a change in policy. For example, shortening the extension period of certain unemployment benefits “saved” about $8 billion and sunsetting an increase in the Medicare physician reimbursement rate (the “doc fix”) after 19 months “saved” almost $40 billion. 

It remains to be seen whether concerns about the immediate deficit, which is largely driven by economic conditions, will be translated into hard choices on the long-term structural deficit. 

In that regard, it is worth noting that the policies extended in the extenders bill carry large long-term costs whether they become visible now or in the...

Wednesday, May 26, 2010 - 4:56 PM

While we publish a weekly Washington Budget Report (sign up here), we wanted to direct your attention to some other budget items we are watching this week.

  • The Senate is considering a McCaskill/ Sessions (amendment text here) that would institute statutory discretionary spending caps for three years.
Monday, May 24, 2010 - 5:27 PM

Today the Senate began considering the $59 billion supplemental spending bill (HR 4899) that the Senate Appropriations Committee approved last week. The bill includes emergency funding for priorities such as military operations in Iraq/Afghanistan, disaster assistance and veterans disability payments.  (For more details on the legislation, please see last week’s Washington Budget Report).

During the course of the week, amendments will likely be proposed to add extraneous items to the bill.  The Concord Coalition urges policymakers to resist adding non-emergency spending that will add to deficits that are already fiscally unsustainable. If these items are added, they should be paid for without emergency designations that exempt them from budget allocations.

Another potential addition to the bill is a procedural device called a “deeming resolution.”  Deeming resolutions are procedural shortcuts that Congress resorts to when its members have not lived up to their responsibility to pass a budget resolution.  Deeming resolutions have...

Monday, May 24, 2010 - 5:25 PM

The extenders bill that the House will consider this week is a timely reminder of why it is important for Congress to complete action on a budget resolution.  A budget resolution continues to elude Congress, but there has been considerably less trouble reaching agreement on a bill that the Congressional Budget Office estimates will add a staggering $167 billion to the deficit over 2010-2014 and a net increase of $134 billion over 2010-2020. 


Last Thursday, leaders of the Senate...