June 26, 2017

The (Tab)ulation

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Tuesday, May 16, 2017 - 10:53 AM

Earlier this year President Trump said he would like to have a balanced budget “eventually” but not at the expense of higher spending on the military.

Robert L. Bixby, executive director of The Concord Coalition, called Trump’s comment “troubling because it indicates that he does not feel constrained by the need to make trade-offs in pursuit of his policy goals. It is an invitation to pit any worthy initiative against the goal of a balanced budget regardless of the cost.”

We can see this problem again in a recent Trump interview with The Economist in which he acknowledged that he also wants his large proposed tax cuts to take precedence over deficit reduction, at least in the near future.

The proposed cuts are estimated to cut trillions of dollars in federal revenue over the next decade, and Trump clearly plans to rely on some additional federal borrowing to help fill the resulting fiscal gap. That would be in addition to the $9.4 trillion in deficits that the Congressional Budget Office has already...

Tuesday, May 16, 2017 - 10:12 AM

Lawmakers recently received a timely warning about the nation’s fiscal health from a particularly credible and persuasive source: Gene L. Dodaro, comptroller general of the United States and the head of the Government Accountability Office (GAO).

The warning came as administration officials continued to work on President Trump’s tardy proposed 2018 budget, and as lawmakers have been considering substantial tax cuts and fundamental changes in the health care system.  

Fortunately, Dodaro’s testimony before the House Budget Committee included not just an explanation of our fiscal difficulties but an array of recommendations that could help deal with them. Congress and the president would do well both to heed Dodaro’s warning and carefully consider his agency’s recommendations.

“The Congress and administration face serious economic, security and social challenges that will require difficult policy choices in the short term about the level of federal spending and investments as well as ways to obtain needed resources,” Dodaro said. “At the same time, the federal government is highly leveraged in debt by historical norms and on an unsustainable long-term fiscal path caused by a structural imbalance between revenue and spending absent a...

Tuesday, May 9, 2017 - 10:10 AM

Amid all the debate in Washington on health care, taxes and other things, the congressional budget process for the coming year is already behind schedule and seems to have almost been forgotten.

Congress has yet to even consider a Fiscal 2018 budget resolution, despite a statutory deadline of April 15 for having one in place. The congressional budget committees are still reportedly weeks away from even getting down to business on preparation of a resolution.

For its part, the Trump administration released only a partial spending plan in mid-March that lacked overall fiscal targets, and is promising a more complete plan later. The president has also suggested deep tax cuts but released only a vague outline of what he has in mind.

Congressional leaders say they want to get back to “regular order” in the appropriations process, a laudable goal. They voiced similar hopes last year, but the process broke down again, as it has so many times in the past.

As a result, lawmakers did not pass most of the necessary spending legislation for the...

Tuesday, May 9, 2017 - 9:50 AM

Attacking waste is no panacea for the federal government’s fiscal problems. Those problems are simply too large, and in any case there are often political differences over whether a particular project is a waste or an important public service.

But a recent report from the Government Accountability Office (GAO) is a reminder that there are still opportunities for significant savings and efficiency increases in many parts of the federal government.

The report is the latest in a series of annual reports on reducing fragmentation, overlap and duplication in the government. It also includes suggestions on cost savings and revenue enhancement through such things as ensuring compliance with certain fuel taxes.

“The federal government faces a long-term, unsustainable fiscal path based on an imbalance between federal revenues and spending,” the GAO says. “While addressing this structural imbalance will require fiscal policy changes, in the near term opportunities exist in a number of areas to improve this situation, including where federal programs or activities are fragmented, overlapping, or duplicative.”

This year’s report identifies 79 new steps that Congress and executive branch agencies could take in 29 areas to improve efficiency and...

Tuesday, May 2, 2017 - 12:35 PM

Last week, Treasury Secretary Steven Mnuchin and Gary Cohn, chairman of President Trump’s Council of Economic Advisers, unveiled a one-page document that laid out the administration’s priorities for tax reform. While a document with such little detail could hardly be considered a “tax reform plan,” it is nonetheless instructive to look at how tax changes along the lines of what the administration is seeking could impact the nation’s already-large deficits.

The Committee for a Responsible Federal Budget (CRFB) estimated that tax changes consistent with the administration’s one-page proposal could decrease revenue by $3 trillion to $7 trillion over 10 years, with the “best rough estimate” being around $5.5 trillion. (Importantly, this figure excludes another $700 billion in interest costs that would be incurred if the tax cuts were entirely deficit-financed.)

Mnuchin and other members of the administration have argued that economic growth spurred by their tax changes might make up the revenue loss. However, there is no non-partisan economic model or historical evidence to suggest this could be true. The administration has also said that some...

Tuesday, April 25, 2017 - 10:04 AM

Many elected officials in both parties have long called for tax reform, although they often differ on what tax-related issues need to be addressed.

As President Trump and members of Congress consider tax proposals to pursue this year, a new national survey by the Pew Research Center may provide some useful information -- and perhaps a surprise or two -- on what taxpayers themselves think about the tax system.

Supporting the general idea of reform, the survey found that 56 percent of the respondents viewed the federal tax system as unfair, up from 48 percent in early 2015. The survey had a 2.9 percent margin of error.

But the survey found little change in recent years in how people viewed their own tax burdens, and some lawmakers, media commentators and Trump administration officials might be surprised at how many people had no complaints about how much money they send to Washington.

“Just over half (54 percent) say they pay about the right amount in taxes, considering what they get from the federal government, while 40 percent say they pay more than their fair share,” the survey report says. Five percent thought they should be paying more.

Only...

Monday, April 24, 2017 - 12:26 PM

Congress is again down to the wire on spending legislation for the current fiscal year, which is already half over. Returning to Washington after a 2-week recess, lawmakers need to take action before a stop-gap measure expires at midnight on Friday.

The alternative would be a shutdown for much of the government, wasting tax dollars and further diminishing public confidence in elected officials’ ability to take care of their fundamental budgetary responsibilities.

This spending legislation should have been approved well before last Oct. 1, when Fiscal 2017 began. But Congress has only approved one of the twelve annual appropriations bills that are needed to keep the government running.

Instead, Congress has relied -- as it has in each year since 1997 -- on stop-gap measures known as “continuing resolutions” that generally continue funding for federal programs at current levels, regardless of changing needs and priorities. This reliance on temporary measures also make it difficult for federal agencies and departments to plan and work efficiently.

In addition, lawmakers now find themselves at the start of a new annual budget cycle without having completed their work on the last one.

Congress passed its first stop-gap measure for 2017 in late September, with only two days to spare...

Monday, April 17, 2017 - 12:22 PM

IRS Commissioner John Koskinen warned recently that funding constraints and staff reductions at his agency could result in fewer people paying their taxes and the government running higher budget deficits.

The full-time IRS workforce has shrunk by more than 17,000 since 2010, he said. Meanwhile, the agency’s workload has increased because more tax returns were filed and Congress made the tax system more difficult to explain and enforce.

“At well over 10,000 pages, our tax code is now the most complicated it’s ever been,” Koskinen said.

The partial budget plan that Trump released last month, however, called for cutting another $239 million in IRS funding in the coming fiscal year -- despite concerns that Treasury Secretary Steven Mnuchin had previously expressed about low IRS staffing and how it might reduce tax revenue.

Koskinen said in a speech this month that the IRS audited about a million people last year -- less than 1 percent of the individual returns filed and the lowest number of audits in...

Thursday, April 13, 2017 - 10:32 AM

Experts on the federal budget often warn that excessive federal debt could eventually lead to a fiscal crisis. But what would that actually involve, and how could Washington respond to such a crisis?

The Congressional Budget Office recently sought to answer those questions, among others, in a report following up on CBO Director Keith Hall’s testimony before a Senate Budget Committee hearing in February. CBO’s explanations underscore the importance of putting the federal budget on a more sustainable course.

The federal debt is already quite large by historical standards, equaling 77 percent of GDP, and the budget office has projected that under current law it will grow rapidly in the coming decade and beyond.

At some point, CBO warns in the new report, investors worried about the size and growth of the debt “might become less willing to finance federal borrowing unless they were compensated with high returns. If so, interest rates on federal debt would rise abruptly, dramatically increasing the cost of government borrowing.”

Unfortunately, interest payments...

Monday, April 3, 2017 - 11:17 PM

Many Americans are no doubt struggling to understand some of the latest news from Washington about the federal budget. That’s because elected officials in Washington are approaching their work on the Fiscal 2018 budget with some long-unfinished business: They have yet to agree on most of their spending plans for the current fiscal year.

That year is now more than half over. Congress has approved only one of the 12 regular appropriations bills that were supposed to have passed before Fiscal 2017 began Oct. 1. This is a poor omen for the 2018 budget work that is supposed to be completed in the coming months. It also raises the possibility of a costly government shutdown later this month.

Instead of getting more 2017 spending bills passed, Congress has been relying on stop-gap measures known as “continuing resolutions” that generally continue funding for federal programs at current levels -- regardless of changing needs, new priorities and the government’s growing debt.

In addition, the failure of Congress to make timely final budget decisions makes it difficult for federal agencies and departments to plan effectively, anticipate appropriate staffing levels and commit to important projects and...