November 26, 2014

The (Tab)ulation

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Tuesday, May 22, 2012 - 11:01 AM

In late April, the Medicare Trustees released an annual report on the financial status of the program. In their report, the trustees are required to analyze where Medicare costs are heading based on a strict reading of current law. However, there are numerous reasons to believe that these numbers do not give the full picture. As noted by the trustees, “Medicare’s actual future costs are highly uncertain and are likely to exceed those shown by the current-law projections in this report.”

To illustrate the cost picture more fully, the Medicare actuaries just released their updated 2012 “Illustrated Alternative Scenarios” which examine some of the shortcomings of the official Medicare projections.

 Medicare Cost Projection Percent of GDP 
  2030 2080
2009 (PRE-ACA) Trustees' Official Projection 6.26% 10.69%
2012 TRUSTEES' Official...
Tuesday, May 15, 2012 - 7:34 AM

Throughout this painfully prolonged economic recovery, economic developments as they are reported have often been confusing. They seem to send mixed messages about the best courses of action for fiscal policy.

Sometimes we are told that more personal spending (consumption) would be good, and sometimes we are told we need to save more. Sometimes we are told that we need to reduce the government budget deficit, and sometimes we are told that continued deficit spending is needed to avoid a double-dip recession.

So what should we be doing with fiscal policy right now -- consolidating or stimulating?

The most recent economic news is that the economy’s overall growth rate has slowed and is falling short of expectations (2.2 percent annual growth rate of GDP for first quarter of 2012 compared with 3 percent in the prior quarter and 2.5 percent expected). Personal spending has slowed as well (0.3 percent monthly growth in March, down from 0.9 percent the prior month and below the 0.5 percent expected). Job gains have also weakened and are not keeping pace with the natural growth in the working-age population.

This news suggests that more private consumption spending, encouraged by continued stimulative, deficit-financed government spending and tax cuts, is needed to further expand...

Thursday, May 3, 2012 - 11:00 PM

Cinco de Mayo over the years has become a popular American excuse to overindulge on nachos and beverages served in salt-rimmed glasses, but it should also serve as a reminder about the severe consequences of incurring large national debt. Many people believe that Cinco de Mayo is Mexican Independence Day (September 16, but that's another story), but it's really about forestalling the bill collectors.

In 1861 the newly formed Second Republic of Mexico faced untenable debt following the Mexican-American War, the Mexican Civil War and the Reform War.  President Benito Juárez declared that the Republic would not make payments on its foreign debt for two years. Most of its debt was owed to Great Britain, Spain and France, which took exception to not being repaid in the way large countries did in those days: They sent their navies to dun the new nation, seizing the port at Veracruz as collateral.

In late 1861 the French, led at the time by Napoleon II  - as ambitious about worldly domination as his namesake - sent troops inland to recover their money, and by spring the following year had pushed Juárez and his government into exile. But on May 5, 1862, the poorly equipped Mexican army, outnumbered 2-to-1, finally held its ground at Puebla, about 80 miles from Mexico City.  The military upset has...

Monday, April 16, 2012 - 3:23 PM

On today's federal tax filing deadline, it just so happens that Congress and the Administration have been thinking of different ways to raise tax burdens on the rich. Last week I participated in a “Tax Day” event at the Tax Policy Center called “Should the Rich Pay Higher Taxes?”, speaking on a panel which also included TPC’s director Donald Marron, former CBO director and former McCain adviser Doug Holtz-Eakin (now president of American Action Forum), and economist rich guy (and a member of the “Responsible Wealth” coalition) David Levine.

TPC’s Howard Gleckman moderated the event (and blogged about it afterward, here) and at one point asked each of us “Who is rich?”  I at first didn’t know how to answer that; “rich” is a relative concept that depends on one’s personal “baseline,” of course!  But then I considered the focus of the event – what the tax burdens of “the rich” should be -- and I realized that in a sense, all of us, collectively at least, might be considered “rich,” in that U.S. taxes are quite low relative to our national...

Monday, April 16, 2012 - 2:01 PM

It’s getting to be that time again when the Social Security and Medicare Trustees release their annual report on the programs’ 75-year outlook. This report is the source of valuable information, but it often causes confusion because of the different conclusions that can be drawn depending upon whether one looks at trust fund balances, which are positive, or at cash flows, which are negative.
 
Is the glass half-full or half-empty?
 
The Concord Coalition has always stressed the importance of cash flows over trust fund balances. As the Congressional Budget Office (CBO) has observed, government trust funds “have important legal meaning but little economic or budgetary meaning.”1
 
This is because trust fund “assets” are nothing more than promises from the government to pay itself a lot of money in the future regardless of whether any resources have been saved for that purpose. Trust fund balances are thus easily manipulated to increase their claims on general revenues.
 
Two recent examples demonstrate why trust fund balances should be taken with a grain of salt. One involves a grant of spending authority (new bonds) to the Social Security trust funds unsupported by any new income. The other involves cutting spending from Medicare and raising Medicare payroll taxes to...

Sunday, April 1, 2012 - 11:00 PM

A rare display of bipartisan fiscal cooperation broke out on Capitol Hill last week when 38 House members (22 Democrats and 16 Republicans) braved an onslaught of interest group pressure to vote in favor of a budget resolution designed to rein in the deficit through a combination of spending cuts and tax increases. The budget plan, offered by Representatives Jim Cooper (D-TN) and Steven LaTourette (R-OH) as an amendment to the House budget resolution, was based on the recommendations of the Simpson-Bowles fiscal commission. It came 15 months after a bipartisan majority of that commission put forth a credible and comprehensive plan to address the deficit and was the first budget plan based on the commission’s work to come up for a vote in the House or Senate.

While the nays on the Cooper-LaTourette amendment outnumbered the yeas by 10 to 1, the very existence of a bipartisan budget alternative signaled an important breakthrough. It demonstrated growing frustration with the starkly partisan plans that members are routinely pressured to choose from and established a framework upon which future bipartisan efforts can be built.

There is little doubt that future efforts will be needed.

Legislation will have to be enacted by the end of the year unless Congress and the President want to allow all expiring tax...

Friday, March 30, 2012 - 12:38 PM

 

Sometimes it can seem like none of our elected representatives are willing to buck their own party leaders, let alone vote for something because it’s for the good of the country, rather than serving some ideological purpose.

That’s why bipartisan support this week in the House to use the Simpson-Bowles commission recommendations to guide the 2013 budget was like a breath of fresh air. No, the amendment did not come close to passing, but the 38 members who broke ranks and voted aye are true heroes of fiscal responsibility. Political considerations took a backseat to doing the right thing, and we enthusiastically commend these brave men and women for stepping up and being counted:

Jim Cooper (D-TN) Sponsor
Steven LaTourette (R-OH) Co-sponsor
Rob Andrews (D-NJ)
Charlie Bass (R-NH)
Dan Boren (D-OK)
Leonard Boswell (D-IA)
Ann Marie Buerkle (R-NY)
John Carney (D-DE)
James Clyburn (D-SC)
Jim Costa (D-CA)
Henry Cuellar (D-TX)
Charlie Dent (R-PA)
Bob Dold (R-IL)
Chaka Fattah (D-PA)
Chris Gibson (R-NY)
Jim Himes (D-CT)
Tim Johnson (R-IL)
Ron Kind (D-WI)
Rick Larsen (D-WA)
Dan Lipinski (D-IL)
Cynthia Marie Lummis (R-WY)
Pat Meehan (R-PA)
Ed Perlmutter (D-CO)
Collin...

Tuesday, March 27, 2012 - 10:26 AM

The Congressional Research Service (CRS) has released a new report by Jane Gravelle and Thomas Hungerford called “The Challenge of Individual Income Tax Reform: An Economic Analysis of Tax Base Broadening.” In a nutshell, the report could be called “Base Broadening Is Hard to Do.” 

The Washington Post’s Lori Montgomery summarized it nicely on Friday, including this Republican staffer’s sarcastic reaction to the report:

“Reports suggesting tax reform isn’t easy are greatly appreciated. We look forward to future reports on water being wet,” said Sage Eastman, a senior aide to House Ways and Means Committee Chairman Dave Camp (R-Mich.), whose panel drafted the principles for tax reform laid out in the Ryan budget.

The CRS report emphasizes that although the 200-plus tax expenditures for individuals under the federal income tax are worth more than $1 trillion per year, the largest 20 of them...

Monday, March 19, 2012 - 11:02 AM

There has been a lot of confusion recently about whether the Affordable Care Act (ACA), the health care reform legislation passed in 2010, is now projected to cost substantially more than previously estimated.

The short answer is no -- the costs are still tracking pretty closely to the trajectory projected by the Congressional Budget Office (CBO) in 2010. The main reasons for the recent confusion involve a new estimate from the CBO and the fact that it has been two years since the legislation passed, putting us two years closer to the time it will be fully implemented.

The CBO just updated its cost estimate of one particular part of the ACA, the part dealing with insurance coverage. This part of the legislation will require nearly all Americans to obtain health insurance coverage and creates the exchanges, subsidies, and expanded Medicaid program that will provide the new coverage. Most of these measures fully come online beginning in 2014 and involve new spending that CBO accounts for as the “gross costs” of the insurance provisions. This part of the legislation also brings in new revenue to the government in the form of penalty payments and, starting in 2018, an excise tax on high-cost insurance plans. Once CBO takes these revenues into account, it creates a “net cost” of the coverage provisions.  ...

Tuesday, March 13, 2012 - 8:40 AM

As political candidates offer vague promises of spending restraint and Congress considers the administration’s new budget, Americans face an unpleasant fiscal landmark: before we get to the election in November, the national debt will exceed the U.S. economy’s entire annual production.

The debt has not exceeded the Gross Domestic Product (GDP) since World War II. Once that war was over, however, the debt stabilized and then steadily fell as a percentage of the economy.

Unfortunately, nothing like that is on the horizon today. On the contrary, government projections show the federal debt – which recently topped $15.5 trillion -- continuing to increase rapidly in the years ahead as we continue to borrow and as today’s unusually low interest rates eventually rise toward their historic average.

The Concord Coalition’s projections, based on reasonable assumptions about future decisions by elected officials, show federal debt snowballing even more rapidly than government projections do. And if the economy falters, the debt would grow even faster.

Even sweeping fiscal reform plans, such as those recommended a year ago by President Obama’s bipartisan fiscal commission, envision the federal debt continuing to rise for decades.

A few facts about the federal debt to keep in mind:

+ It consists...