September 29, 2016

Posts on economy

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Tuesday, September 27, 2016 - 10:31 AM

The first segment of the first presidential debate between Democrat Hillary Clinton and Republican Donald Trump was dedicated to achieving prosperity.

That provided an opportunity for the moderator to ask about -- and the candidates to talk about -- their respective plans for putting the nation’s projected debt on a sustainable path. It’s hard to see how prosperity can be achieved, or long maintained, with a debt that is projected to reach unsustainable levels.

Unfortunately, the subject was not discussed.

Trump made a couple of passing references to the debt and Clinton noted that Trump’s plan might increase the debt, but neither of them made a connection to the debt as an economic issue, much less described what they would do about it.

That’s too bad because one of these two candidates will become president in 2017 and will immediately be confronted with having to submit a budget to Congress against the backdrop of rising deficits and debt.

Each has made some expensive proposals that would have to be paid for and the American people have a right to know how they plan to do this without making the debt problem worse.

Consider what awaits the next occupant of 1600 Pennsylvania Avenue:

  • For the first time since 2009, the budget deficit is projected to increase this year,...
Thursday, August 27, 2015 - 11:00 AM

It has been easy for advocates of generationally responsible tax and spending policies to look at Capitol Hill with dismay for the past few years. A few consequences of inaction and lack of bipartisanship include:

  • A complete breakdown in the federal budget process.

  • Continued struggles to replace arbitrary, shortsighted caps on discretionary spending with smarter deficit reduction.

  • Total inaction on addressing the main drivers of deficits in the coming years, rising health costs and an aging population.

  • More than 30 short-term extensions of transportation funding and a failure to eliminate the growing shortfall plaguing the Highway Trust Fund.

  • Multiple debt-limit showdowns, each of which threatened the United States’ credit rating and roiled financial markets.

Yet in the past few months, I’ve been pleased to see at least a few positive signs.

In over two dozen staff and member meetings conducted over the first two months of my tenure at Concord, we’ve found that some lawmakers are coming back around to the fiscal realities facing them this fall and in the coming years. Part of the...

Monday, October 27, 2014 - 10:36 AM

An interesting poll this month in the Des Moines Register shows that Democrats and Republicans have very different opinions on the relative importance of the federal deficit versus unemployment and jobs as campaign issues. It might be, however, that the two sides just have different ways of expressing concern over the same issue: our nation’s economic future.

Almost one-quarter of Republicans in the poll of likely Iowa caucus-goers ranked the deficit as the top issue (23 percent). Only 11 percent of Republicans ranked unemployment/jobs as the top issue.

On the Democratic side, the numbers were nearly the reverse with 21 percent of likely caucus-goers ranking jobs as their top priority and 9 percent ranking the deficit first.

Taken together, roughly one-third of likely caucus-goers in both parties ranked these two issues at the top. 

The Register poll, though limited to Iowans, suggests that there could be a path to consensus if Democrats and Republicans reject the premise that concern about the deficit implies indifference to unemployment and jobs, and vice versa.

It is possible, and indeed it is perfectly...

Monday, July 14, 2014 - 11:18 AM

With the economy continuing its slow recovery, the administration’s Mid-Session Review budget projections released on Friday show little change in the overall outlook. Under the President’s policies, the Office of Management and Budget (OMB) anticipates a deficit for the current fiscal year of $583 billion, down $66 billion from the administration’s March projection and far below the trillion-dollar-plus deficits that came with the Great Recession.

It is important to remember, however, that the federal debt -- high by historical standards, at nearly $17.6 trillion -- remains a deep concern, even with quite favorable economic and political assumptions.

Under its proposed budget, the administration says, the 10 annual deficits over the next decade would add another $5.5 trillion to that total. That is up by nearly $600 billion over the March budget.

While the deficit is lower than the earlier projection for 2014-16, it is higher in all subsequent years. The biggest change is that revenues are now projected to be $760 billion lower over the coming decade.

As a result of higher deficits in the out years, debt held by the public is now projected to be slightly higher (72 percent of GDP) in 2024 than projected in the March...

Friday, February 28, 2014 - 4:41 PM

Ways and Means Committee Chairman Dave Camp (R-Mich.) released a detailed discussion draft on comprehensive tax reform Wednesday that eliminates inefficiencies in the tax code and makes it simpler. The Concord Coalition commends Chairman Camp for his efforts. The shame is that it looks like the rest of Congress and the President are desperate to avoid discussing how to improve upon it and then enact a reform plan.

Camp’s proposal effectively leaves the tax code with three tax brackets: One at 10 percent, one at 25 percent, and an additional 10 percent surtax for high earners. To achieve this consolidation and lowering of rates without adding to the deficit, Camp’s plan limits, discards or merges many of the code’s tax expenditures -- special provisions that favor certain behaviors, individuals and businesses. The proposal significantly alters “sacred cow” provisions like the home...

Thursday, February 6, 2014 - 4:07 PM

State lawmakers across the country are debating how to spend large surpluses after the economic recovery helped produce higher-than-expected tax collections for the second year in a row.

State legislatures and governors have welcomed this change after years of enacting painful spending cuts to balance their budgets. But they are waging battles both within and between their political parties about how to spend the extra money.

In a year when up to three dozen governors could run for re-election, as well as countless more state legislators who could be on the ballot, many of the proposals have unfortunately focused on short-term measures.

State officials should consider how to use at least part of their surpluses to improve the long-term health of their budgets instead of just haggling over whether to use the surpluses to finance short-term tax cuts or spending increases. A recent Concord blog post highlighted a report by the State Budget Crisis Task Force that said states have done little to address the long-term structural problems in their...

Friday, January 31, 2014 - 11:34 AM

For those interested in a vision of fiscal sustainability, the State of the Union Address was a major disappointment.

President Obama noted that the deficit has been cut in half, which is a positive development, but he offered no strategy for making further progress. At $680 billion and 4.1 percent of the economy, last year’s deficit was still quite high. More troubling is that fiscal policy remains on an unsustainable path -- a projection that deserved at least some passing mention.Obama briefly acknowledged that more could be done to bring down the deficit “in a balanced way,” but the general sense was that it was time to move on.

Few would dispute that creating new jobs is a top priority, but that task is compatible with a continued focus on fiscal sustainability. Indeed, a properly phased-in fiscal sustainability plan would improve the economic outlook. Moreover, the budget agreement hailed by the President did little to address either.  

When the President did mention fiscal issues in his speech it was mostly to promote new spending or tax cuts with no cautionary reminder that even a “pay-as-you-go” standard will...

Monday, January 13, 2014 - 5:02 PM

The national taxpayer advocate, who serves as ombudswoman for the Internal Revenue Service (IRS), released her annual report last week, saying budget reductions have “significantly hampered” the agency’s ability to provide top-quality service. While additional funding would undoubtedly help, an even better way to help taxpayers and collect revenue more effectively would be for Congress to eliminate many tax expenditures. 

Nina Olson’s report notes that IRS funding has decreased by nearly $1 billion, or 8 percent of its budget, since Fiscal Year 2010.

Her report says that shrinking budgets for the agency mean “fewer dollars available to fund all federal programs.” Restoring the lost funding, she said, would lead to more effective revenue collection and could help reduce the budget deficit.

The annual report came after a very tough year for the agency. The IRS became embroiled in controversy when it was revealed that it had applied extra scrutiny to some political advocacy groups that had applied for tax-exempt status. Olson’s office issued a special...

Friday, December 6, 2013 - 3:19 PM

Extending emergency unemployment compensation for another year would add 200,000 jobs but carries a price tag of $25 billion, according to an analysis released recently by the Congressional Budget Office (CBO). Such an extension now appears to be a central focus of negotiators trying to reach a budget deal before Congress adjourns for the year.

Emergency unemployment compensation (EUC) provides more “bang for the buck” than many other policies aimed at improving the economy. It provides an immediate surge in economic activity due to recipients quickly spending their benefits on consumer goods and services, which boosts aggregate demand and induces businesses to increase production and hire more workers.

CBO noted that part of this positive effect is offset as some workers reduce the intensity of their job searches in response to the extension of benefits.

Emergency unemployment compensation was approved in 2008 as the unemployment rate was rapidly rising due to the recession. It provides at least 14 additional weeks of benefits to individuals who have exhausted...

Monday, October 7, 2013 - 4:13 PM

Lawmakers struggling with the Fiscal 2014 budget will face an even tougher challenge funding the government in future years as interest payments rise to record levels, squeezing other parts of the budget and making it more difficult to quell rising deficits.

Although slow economic growth and Federal Reserve monetary policies have kept interest rates at record lows in recent years, the Congressional Budget Office (CBO) expects rates to rise steadily in the coming years, making interest payments the fastest growing part of the federal budget.

For Fiscal 2013, CBO estimates interest payments totaling $223 billion, or 1.3 percent of GDP. By 2023, interest payments are expected to climb to $823 billion, which is 3.1 percent of GDP -- a percentage that has only been exceeded once in the past 50 years. By 2038 the figure would increase to 4.9 percent.

Rising interest payments would make a larger share of revenue unavailable for spending on federal programs; to prevent the deficit from growing larger, rising interest payments would either crowd out spending on federal programs or cause taxes to go up.

Assuming Washington eventually navigates its immediate budget and debt limit difficulties, interest rates are expected to rise in the next few years due to an improving economy. Yet, if interest rates are even...