I looked at the Treasury Department’s “green book” on the Administration’s revenue proposals only a few days ago, curious to see how the Bush (soon-to-be Obama) tax cuts would be described, considering that they comprise the single most costly policy in President Obama’s proposed budget (about $2 trillion over ten years according to CBO). Seems like a pretty significant “revenue proposal” to describe, right? The Treasury green book is 131 pages long, with each tax proposal described fairly thoroughly, over the course of 1 to a few pages each, in terms of current-law treatment, reason for change, and the specifics on the President’s proposal. Yet the extension of the 2001 and 2003 tax cuts is described in exactly two places–first, as a footnote in the table of contents (note, through the emphasis added, how...
GET INVOLVED
Tabulation Topics
Posts on federal budget
Subscribe to this feed 
Both Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner have been vocal this week regarding the need to rein in our growing federal budget deficits as the economy begins to recover and work to confront the structural fiscal imbalances projected over the coming decades.
Yesterday, Chairman Bernanke testified before the House Budget Committee and spent a portion of his testimony focusing on fiscal policy. He emphasized that it is necessary for policymakers to confront these challenges now more than ever. A failure to act, Bernanke noted, will result in economic consequences which will impede growth:
Addressing the country’s fiscal problems will require a willingness to make difficult choices. In the end, the fundamental decision that the Congress, the Administration, and the American people must confront is how large a share of the nation’s economic resources to devote to federal government programs, including entitlement programs. Crucially, whatever size of government is chosen, tax rates must ultimately be set at a level sufficient to achieve an appropriate balance of spending and revenues in the long run. In particular, over the longer term, achieving fiscal...
In Nobel-prize winning economist and New York Times columnist Paul Krugman's column Monday, he makes an interesting point about California's budget woes that supports much of what The Concord Coalition's message has been for the last three years traveling the country on the Fiscal Wake-Up Tour. The irony is that he often protests much of what we stand for.
In writing about the political barriers to sound fiscal policy and governance in California, he expresses concern that it "foreshadows the future of the nation as a whole." He continues:
"Last week Bill Gross of Pimco, the giant bond fund, warned that the U.S. government may lose its AAA debt rating in a few years, thanks to the trillions it’s spending to rescue the economy and the banks. Is that a real possibility?
Well, in a rational world Mr. Gross’s warning would make no sense. America’s projected deficits may sound large, yet it would take only a modest tax increase to cover the expected rise in interest payments — and right now American taxes are well below those in most other wealthy countries. The fiscal consequences of the...
Steven Pearlstein has a column in Wednesday, May 20's Washington Post called “Budget Scolds Shouldn’t Drown Out the Chorus Calling for Health Reform.” We assume that The Concord Coalition is among his targets given his definition:
"In the political menagerie that is Washington, there exists a species known as the budget scold — analysts, advocates, editorial writers and politicians who possess a fierce determination to bring the federal budget into better balance.
Budget scolds have a wonkish demeanor and a skeptical outlook. They possess an undue fascination with rules and processes, and speak in the arcane language of baselines, sunsets and pay-fors."
Although we don't define ourselves by the fact that we occasionally "scold," the rest of his characterization isn't that far off -- just ask those who run into us at parties. But the point of his article is that Pearlstein is concerned that worries about the budget deficit are going to scuttle health care reform. He writes:
"There have been times when the budget scolds have saved the country from short-...
While fielding a question from the audience during his town hall meeting on credit card reform, President Obama took an opportunity to emphasize the need for policymakers to focus on restoring fiscal responsibility within the federal government:
"What I'd like to do is just shift off -- pivot off your question to talk about this issue of debt and deficits one more time. During a recession of this severity it is important, as I explained, for the government to step in and fill the hole in demand that was created by consumers and by businesses, to get the economy kick-started.
But the long-term deficit and debt that we have accumulated is unsustainable. We can't keep on just borrowing from China, or borrowing from other countries -- (applause) -- because part of it is, we have to pay for -- we have to pay interest on that debt. And that means that we're mortgaging our children's future with more and more debt, but what's also true is that at some point they're just going to get tired of buying our debt. And when that happens, we will really have to raise interest rates to be able to borrow, and that will raise...
You might look at the title of this post and ask, "Why is The Concord Coalition upset about a small deficit -- shouldn't that be a good thing?"
Most of the time, the answer would be "yes," but when a deficit, even a small one, is reported for the month of April, that is unusually bad news.
The federal government typically sees a surge in revenue during the month of April because of the large amount of tax payments filed close to the April 15th deadline. Yet, in the Treasury Department's April monthly statement the federal government posted a $20.9 billion deficit -- the first April deficit since 1983.
This reflects abnormally high spending, and unusually low revenues. Spending was 17.5% higher than last April and tax receipts were 34% lower. Even more shocking is that individual income tax collections are down 24% for the fiscal year and corporate income tax receipts have dropped from $171 billion last year to $71 billion this year -- a 59% decrease!
All of that is happening against the backdrop of huge increases in government spending primarily due to the stimulus bill, TARP, and automatic counter-cyclical spending such as unemployment compensation.
The month of April brings the federal deficit to $802...
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...
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...
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...
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...