July 24, 2014

Posts on federal budget

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Wednesday, May 13, 2009 - 12:19 PM

It has been the beginning of a busy week for those closely following developments in the federal budget. On Monday, President Obama released the final installment for his FY 2010 budget. Then yesterday, the annual Social Security and Medicare Trustees' Reports were released.

This year, the Trustees' Reports received additional attention because analysts were curious how the current economic downturn would affect the finances for these programs. Early estimates were that it would have a significant impact. A few weeks ago, the Congressional Budget Office provided updated data showing that income for Social Security was expected to decline by $1.2 trillion over a 10-year period. Most of the lost revenue was a result of revisions in their economic forecast.

The Trustees' Reports reaffirmed the worsening financial position of these two programs. In last year's report, the Trustees noted that Social Security would begin to run cash deficits in 2017 and exhaust the trust fund in 2041. However, yesterday's report accelerated those dates...

Tuesday, May 12, 2009 - 11:17 AM

The Obama Administration released the "final installment" of their FY2010 budget this week. The summary tables can be found here. On his blog, OMB director Peter Orszag explains what's changed from the February release.

Although the Administration has not revised the economic assumptions that go into the budget projections since their February release, they've still had to adjust downward their revenue forecast. This mostly stems from so-called "technical revisions" which reflect new thinking by the Administration about how much revenue the government will receive under the same macroeconomic forecast used in their initial budget document.

They now estimate that overall federal revenue will be less than was projected in February -- between $30 billion and $50 billion in each of this year and next, and $124 billion lower over ten years. The interest costs associated with the combined technical revisions (on net more than entirely accounted for by the revenue revisions) alter the 10-year outlook by $193 billion. Thus, the estimated deficits under the President’s proposals are now about $90 billion higher in each of...

Thursday, May 7, 2009 - 11:56 AM

Ten weeks ago, President Obama released his first budget outline entitled "A New Era of Fiscal Responsibility." That publication provided an overview of what fiscal policy would look like during his first term and started the budget process in Congress (passing their budget resolution last week).

We put forth an analysis of this initial outline which commended the administration on its effort to increase transparency and enact statutory PAYGO rules. However, we cautioned the budget attempted to do too much -- not necessarily conducive to reigning in emerging deficits. These concerns were heightened when the Congressional Budget Office released its analysis shortly thereafter. Unlike the President's original budget which showed only large deficits in the immediate term attributed to the economic climate, CBO showed deficits increasing much later in the outyears -- reaching 5.7 % of GDP in 2019 -- and net interest outpacing spending on national defense by that time.  

In an effort to address those concerns and begin...

Monday, May 4, 2009 - 3:36 PM

Now that the Congressional Budget Resolution has passed, there has been a lot of talk about how the reconciliation instructions included in the resolution will make it easier for a health care reform effort to pass.  Particularly since the mechanics of reconciliation provide for a simple majority vote for approval -- instead of the 60 votes that might be needed to overcome a filibusterer in the Senate.

Ironically, considering political motivations, it might be easier to round up 60 votes for a fiscally irresponsible health care reform bill, than to attain the 51 votes for a fiscally responsible bill -- which would be needed to utilize the reconciliation fast track procedure. 

Let me explain. When the modern budget process was established, the idea behind including a lower procedural bar under reconciliation was to facilitate legislation that contained difficult choices resulting in deficit reduction. Only in recent years have legislators deviated from this intention, most notably by the usage of reconciliation to pass large, deficit-increasing tax cuts.

The guidelines put in place by the budget resolution for reconciliation -- in a sense -- navigate this budget procedure closer to its original purpose. Specifically, for Congress to consider any health care reform bill, it must contain...

Tuesday, April 28, 2009 - 12:50 PM

Listening to President Obama’s weekly address on Saturday was a rollercoaster experience for me. At times, I was lifted by his message of fiscal discipline. At other times, I was depressed by his unwillingness to connect fiscal discipline with politically difficult choices.

It started out well with the President’s observation that “the cost of confronting our economic crisis is high. But we cannot settle for a future of rising deficits and debt that our children cannot pay.”

Then came the first downward plunge when the President proclaimed, “we have identified two trillion dollars in deficit reductions over the next decade.” 

This statistic is based on savings achieved from a contrived “baseline.” If you assume that war spending remains at the current level adjusted for inflation over the next 10 years, you can get a lot of “deficit reduction” by reducing that commitment -- as even the Bush Administration was planning to do. And, if you assume that all of the Bush tax cuts are permanent, which they are not, you can get more “deficit reduction” by assuming that a portion of them will not be extended, which is what would happen anyway under current law. So there isn’t really a lot of deficit reduction in the $2 trillion figure the President cited, and no hard choices.

...
Friday, April 3, 2009 - 10:40 AM

As we previously noted, President Obama released the outline of his first budget at the end of February.  Those details have been scored by the Congressional Budget Office and included in the March update to their Budget and Economic Outlook. Now, the proverbial "budget ball" now rests in Congress as they work towards agreeing on a unified budget resolution.   

Both the Senate and House held votes last evening after marking up their respective resolutions last week. The House approved its resolution by a vote of 233-196 while the Senate's resolution passed by a vote of 55-43.

The two resolutions are not that different on the surface: they both follow the administration's leads on attempting to cut the deficit in half over four years, establishing health care reserve funds, and addressing...

Wednesday, March 18, 2009 - 2:40 PM

As you recover from what was hopefully a fun-filled St. Patrick's Day, it might be helpful if I were able to convert our latest issue brief into a fun, bite-sized and easily digestible, bullet list of the most interesting things we found in President Obama's first budget submission to Congress.

First some background: in general, every presidential budget is significant because it establishes the priorities and issues which the administration perceives to be most important and how they plan to address and resolve them. The first budget of a new administration is even more important in that it sets expectations for the coming years and how these policies reconcile with the promises made during the campaign. The submission the Obama Administration made at the end of February was just an outline of the larger budget they will present later in the year, but with enough information that Congress can turn towards creating the Congressional budget resolution in the next month or two.

Unlike the iconic shamrock used on St. Patrick's Day, our issue brief contains more than "three leafs" of knowledge [and you should still read the issue brief!]:

  • The...
Wednesday, January 28, 2009 - 9:30 PM

The House of Representatives voted today to pass an $819 billion stimulus package. Attention now turns to the Senate debate and vote, and then to reconciling the two chambers' versions.

To illuminate the competing interests in the bill: between short-term stimulus and long-term investment; and to provide 10 policy principles to guide the debate, The Concord Coalition today released an issue brief entitled "Designing a Framework for Economic Recovery and Fiscal Sustainability."

There is little question that the economy is in dire shape and that deficit spending is an appropriate policy response. The tricky part is making sure that the deficit spending is for effective short-term stimulus. Long-term investments, which are also funded in the "recovery" bill, are important for long-run economic growth, however it is unclear that the current rushed effort at a short-term economic jolt is the appropriate place for initiating those investments. The more discerning annual budget process provides a better opportunity to plan for those investments and judge the...

Thursday, January 22, 2009 - 6:27 PM

Although I.O.U.S.A. was not graced with the honor of an Oscar nomination this morning, the movie's power and message is undeniable. The filmmakers did a great service to the issue of fiscal responsibility and the country's dialogue about generational stewardship. 

This was eloquently brought home to me in a letter I recently received from one of my Midwestern volunteers. Strong in her Christian faith, she was instrumental in bringing a screening of the documentary "I.O.U.S.A." to her church in order to encourage others to see the parallels between Christian values and the stewardship practices needed now to ensure a good quality of life for future generations.

She starts out with a quote from Martin Luther King:

"The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy."

And continues:

"A diverse group of people at our church gathered expectantly one Sunday afternoon. We shared a potluck meal together and then shared the challenging film, I.O.U.S.A.. I thought I knew what to expect, but there was so much I was unaware of about our economy and how we got to where we are now. I was stunned...

Tuesday, January 13, 2009 - 5:34 PM

There’s news from the Treasury Department today (monthly Treasury statement) on the federal budget deficit for the first quarter of fiscal year 2009 (i.e., 4th quarter of calendar year 2008). I guess this is what a year headed for a (way?-)more-than-a-trillion-dollars deficit looks like; AP reports:

The federal government already has run up a record deficit of $485.2 billion in just the first three months of the current budget year, the Treasury Department said Tuesday.

The deficit is on track to surpass $1 trillion for all of fiscal 2009 and some economists believe it could go much higher.

The deficit for December totaled $83.6 billion, a sharp deterioration from a year ago when the government managed a surplus of $48.3 billion…

All the red ink is occurring because of the massive spending on the $700 billion financial rescue program and a prolonged recession which has depressed tax revenues.

The imbalance from October through December is the highest on record for a first quarter and surpasses the...