October 21, 2014

Posts on federal budget

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Monday, October 4, 2010 - 10:33 AM

Fiscal Year 2010 ended last Thursday but no one was popping champagne corks. Little wonder. For the second year in a row, the federal government ran a budget deficit well in excess of one trillion dollars.

Final figures will be announced later this month, but it seems likely that the FY 2010 deficit was about $1.3 trillion or 9 percent of gross domestic product (GDP). Regardless of the exact number, there is little doubt that the deficit will be the second largest as a share of GDP since the end of World War II. If there is any good news in this, it is that the deficit came down from the previous year’s total, which at $1.4 trillion (9.9 percent of GDP) was the largest of the post-WWII era.

This might not be as bad as it sounds if the deficit were projected to shrink as the economy recovers. After all, much of the huge spike in red ink can be attributed to reduced revenues and higher spending caused by the recent recession and attempts to deal with it. As these factors fade, the deficit will come down. However, projections for the next several years don’t get much better.

As the new fiscal year began on Friday, the most recent projection by the Congressional Budget Office (CBO) showed a deficit of $1.1 trillion for this fiscal year and cumulative deficits of $6.2 trillion over the coming decade. That,...

Wednesday, September 29, 2010 - 2:24 PM

When Congress soon leaves the Capitol for the campaign trail, a long list of unfinished business will likely be left behind. This year will mark the first year since the modern budget process was created in 1974 that no budget resolution has been passed by either the House or the Senate. Of the twelve appropriations bills necessary to fund the federal government during the coming year, Congress has not enacted one of them. To avoid a government shutdown, Congress will need to pass a continuing resolution this week. 

If this breakdown of the budget process were not discouraging enough, there now appears to be a possibility that the Senate could leave without confirming the President's nomination of Jack Lew to head the Office of Management and Budget. The two Senate committees with jurisdiction over the nomination held public hearings and promptly approved the nomination with decisive bipartisan votes. The Budget Committee approved the nomination by a vote of ...

Monday, September 27, 2010 - 4:50 PM

Last week, House Republicans offered a “Pledge To America” outlining their fiscal priorities and reform ideas. As with most such campaign manifestos, it is long on base-pleasing rhetoric and short on troublesome details.

The document correctly warns about the dire fiscal outlook and the potential dangers of escalating deficits and debt. Conspicuously missing from the Pledge, however, is any plan to bring deficits down to a sustainable level or even to improve upon the deficit projections in the President’s budget. It is worth noting that such a plan has also been missing from Congressional Democrats this year because Congress has failed to pass a budget resolution.

The net effect of the Pledge policies would do very little, if anything, to rein in our long-term structural budget deficits and may well lead to deficits even higher than under the President’s budget.

Not only would the Republicans cut taxes by more than the President, but they would spend more on defense and repeal cost-saving provisions in this year’s health care reform legislation. In theory, lower spending on non-defense discretionary programs would offset some of this. But savings from discretionary programs, which must be enacted on an annual basis, are far less certain than savings from entitlement reforms or tax increases, which operate...

Monday, September 20, 2010 - 10:10 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 REGULAR APPROPRIATIONS: 
With less than two weeks remaining before the beginning of the new fiscal year, Congress has not passed a budget resolution or enacted a single appropriations bill for the coming year.   The House has passed a deeming resolution which could be used to pass the appropriations bills, though the Senate has not passed a similar measure.  Last week the Senate Appropriations Committee completed action on the legislative branch and defense bills. ...

Monday, September 13, 2010 - 3:44 PM

The media is buzzing about how House Minority Leader John Boehner and President Obama might be ready to "compromise" on what to do about the Bush tax cuts.  From a story by Shailagh Murray and Lori Montgomery in Monday's Washington Post:

House Minority Leader John A. Boehner (R-Ohio) surprised Democrats on Sunday when he said he might not oppose President Obama's plan to extend the cuts for all but the wealthiest households, although he reiterated his preference for keeping the lower rates in place for all income groups.

Boehner's comments, made on the CBS program "Face the Nation," altered the landscape of the tax debate by suggesting that Republicans might not obstruct Democratic efforts to raise taxes on the top earners - a move advocated by Obama and many other Democrats as necessary to lowering the record deficit.

But read on in the same story.  Boehner did not say he would support letting the top-end cuts expire.  He said he wouldn't oppose extending all the rest of the tax cuts that President Obama is already proposing to extend:

"If the...

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...

Thursday, August 19, 2010 - 5:16 PM

Today we updated our "Plausible Baseline" to take into account the Congressional Budget Office (CBO)'s latest Budget and Economic Analysis.

Our press release, "Concord Coalition Says CBO Report Shows Need to Re-examine Fiscal Priorities," is here.

The picture is below, with backup data here.

 

 

 

 

 

Monday, August 9, 2010 - 6:13 PM

Social Security’s contribution to the overall fiscal gap over the coming decades is smaller than Medicare’s, as the program’s trustees have again made clear in their annual report. If Social Security contributes so much less to the fiscal gap than Medicare, some people ask, why do we have to talk about reforming Social Security? 

It would be a mistake, however, to ignore the pressure that Social Security will put on the federal budget in the future -- and how that problem, if it is not addressed, will steadily grow. The difference between Social Security’s annual income (without interest) and its annual costs would stay close to 1 percent of GDP for decades but grows closer to 1.5 percent later in the 75-year window under the trustees’ “intermediate” assumptions. The longer we wait, the more difficult fixing the problem will become.

Closing the gap on Social Security certainly won’t be fun and will involve sacrifice. We would not want implement immediate changes that would weaken the economic recovery, nor would we want to place undue burdens on current...

Tuesday, August 3, 2010 - 8:16 AM

If President Obama was looking for Congress to rubber-stamp his request for additional “emergency” funding for military operations in Iraq and Afghanistan this year, he was sorely disappointed. He asked for the money last February but a wary Congress didn’t approve the funding until just last week, and only after considerable debate over the war effort and U.S. spending priorities.

Rep. Jay Inslee, a Democrat from Washington state, offered a striking example of the trade-offs that are involved in heavy spending abroad at a time when communities around the country are struggling financially:  A police department in his district could lose as many as 23 jobs.

“We can’t pay for them – our first line of security in our neighborhood – but today we would be voting for something on the order of several years of about $4 billion to train police officers in Kabul,” Inslee said. Another notable dissent came from House Appropriations Chairman David Obey of Wisconsin, who expressed concern about the high cost of the war and doubts about the Afghan government.

The legislation provides for $59 billion in additional spending this year, with $33.5 billion going to the Department of Defense and the rest...