December 20, 2014

Washington Budget Report: Feb. 28, 2012

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Ready Access to Budget Data

The Concord Coalition has launched a new website feature to provide its grassroots members around the country with the latest statistics on the federal budget and the national debt.

“Anyone who has had to work with charts, graphs and presentations has probably experienced the frustration of having different versions in different places, and trying to figure out which ones have been updated with the latest information,” says Stefan Byrd-Krueger, new media and outreach director for Concord, in a blog posting Monday. “That's why we created the Indicators section so that all the interactive charts, images, and downloadable data files are updated across the site the minute we get new data.”

Concord is providing HTML embed code so that visitors to its website can place the same interactive charts on their own blogs or websites – and have them updated automatically.

Read more with Introducing Our Indicators

Structural Deficits Pose Many Risks

As elected officials and political candidates continue to debate the nation’s fiscal problems, The Concord Coalition this week emphasized the need for Washington to deal with long-term “structural” deficits in the federal budget even as short-term measures are used to support the economic recovery.

To understand the current situation and to choose appropriate solutions, it is important to distinguish between “cyclical” and “structural” components of federal borrowing.

“The cyclical deficit is caused by the financial crisis and severe recession from which the country is still recovering,” Concord said in an issue brief Monday. “The structural deficit reflects a chronic mismatch between government revenue and spending that under current policies will dramatically worsen as health care costs rise and the population ages.”

While cyclical deficits are expected in a weak economy and can help get it back on track, large structural deficits pose significant risks in many ways. They can divert savings from more productive investments, crimp important government programs that could support future economic growth, raise interest costs and place “ever-tighter constraints” on the ability of future generations to set their own fiscal priorities or to meet unforeseen challenges.

“Structural deficits will persist so long as policymakers continue to spend more than they tax,” Concord warns. “It is a matter of simple arithmetic. Closing the structural deficit means coming to grips with the forces that are driving spending and revenues farther apart and with the magnitude of the changes that must be made to rein in the resulting deficits.”
 
Read more with The Structural Deficit: What It Is, Why Do We Have One, and Why Should We Worry About It?

Obama Proposes Broad Changes in Tax Policy

President Obama last week released a “framework” for reform of U.S. corporate and small business taxes that would be in addition to recommendations in his 2013 budget for significant changes in individual taxes. Many of the business tax proposals were included in the President’s budget as well.

Obama said the framework would simplify the tax code, lower the corporate rate, eliminate dozens of tax loopholes and subsidies, promote job creation and boost U.S. manufacturing.

According to Diane Lim Rogers, chief economist for The Concord Coalition, the theme of the business tax proposals “is similar to the whole package of tax proposals in the budget: keep statutory marginal tax rates low (or even lower) on everyone, but pay for those lower rates by broadening the tax base in ways that raise burdens on certain types of businesses – those who currently take the most advantage of the tax-expenditure holes in the tax base.”

In a recent blog posting, Rogers gave the tax proposals in the President’s budget a mixed review: “Some of his suggestions are new and would move the country’s unfair, inefficient and overly complex tax system in a positive direction. But some of the most costly proposals are the ones we’ve seen many times before.”

She expressed particular disappointment that the administration’s plan would fail to maintain current-law levels of revenue, in part because it would not offset the cost of its proposed extension of most of the Bush tax cuts.

But Rogers praised the administration’s version of the “Buffett rule,” which states that no household making over $1 million a year should pay a smaller share of its income in taxes than middle-class families pay. By reducing tax expenditures rather than raising marginal rates, Rogers said, the administration's approach “could serve as a segue to achieving base-broadening tax reform.”

Read more with Tax Policy in the President’s Budget

Votes in Congress Show Rising Partisanship

Although bipartisan cooperation and compromise are essential for badly needed fiscal reforms, congressional voting statistics point towards a deepening partisan divide in Washington.

Last week National Journal said its voting ratings for 2011 in the Senate showed that for the second year in a row – and only the third time in the last three decades – no Democrat had compiled a record to the right of a Republican, and no Republican had a record to the left of any Democrat.

House voting, too, showed great polarization. National Journal found that only six Republicans last year compiled what was considered to be a slightly more “liberal” voting record than the most conservative Democrat.
 
“Believe it or not, it wasn’t always so,” John Aloysius Farrell writes in the publication. “In 1982, when National Journal published its first set of voting ratings, 58 senators – a majority of the 100-member chamber – compiled records that fell between the most conservative Democrat  (Edward Zorinsky of Nebraska) and the most liberal Republican (Lowell Weicker of Connecticut). Now it’s zero, zip, nada.”

Farrell notes that the House and Senate “are in a state of near-paralysis over the country’s finances.” But last year’s voting patterns, he writes, offer little cause for optimism: “Polarization remains endemic. Lawmakers march in lockstep with their party. Heretics are purged.”

Among the factors cited by analysts in the article: Shifting demographic patterns, racial issues, lingering grievances over political tactics, less socializing among members of Congress, redistricting deals, voter complacency and news media that place less emphasis on objectivity and accuracy than in the past.

‘Do Nothing Plan’ Deserves Rejection

Voters must push elected officials and political candidates to move forward on fiscal reforms that can protect younger Americans and future generations from the consequences of excessive government debt. Bob Kerrey, co-chairman of The Concord Coalition’s board of directors, hammered away on that theme at a public forum last week at the University of New Hampshire Law School in Concord.

“The question is: What are our priorities?” said Kerrey, president emeritus of The New School in New York and a former U.S. senator from Nebraska. “Do we really care about our kids and our grandkids, or is it just political mumbo-jumbo?”

He was particularly critical of Congress for failing to move forward on important issues like fixing Social Security, which is on an unsustainable track.

“You know how many people (in Congress) are co-sponsoring something to fix that problem?” Kerrey said. “Zero. That means there’s 535 co-sponsors of the Do Nothing Plan.”

Kerrey was joined in the program by John T. Broderick, dean of the law school and a former chief justice of the New Hampshire Supreme Court. Broderick echoed many of Kerrey’s concerns about the country’s fiscal challenges and the shortcomings of elected officials.

“The American people are smarter than the people who are currently serving them,” Broderick said. Both he and Kerrey encouraged young people to become more involved in the political process, and to encourage others to become involved as well.