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In his Fiscal Year 2013 budget, President Obama proposes an array of tax proposals. 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. Four points stand out in the tax proposals in the Obama budget:

(1)    The budget raises revenues only relative to the administration's policy-extended baseline and not relative to current law.

Under the Obama budget, revenues would rise from their current 15-16 percent of GDP to 19 percent by 2015, and to just over 20 percent by 2022. But under current law, all the 2001 and 2003 tax cuts are scheduled to expire at the end of this year -- so that revenues would exceed 20 percent of GDP by 2015, and 21 percent by 2022. Thus, relative to current law, the president is proposing a net reduction in taxes. Compared with the CBO's projections of the cost of extending all of the Bush tax cuts (and the “adjusted baseline” the administration prefers to start with), however, the president's proposals raise revenue. That’s because Obama proposes to let the high-income Bush tax cuts expire and to add some other tax increases on...

The demise of the deficit reduction super committee left many people wondering whether the polarized atmosphere in Washington has made it impossible for Republicans and Democrats to reach agreement on the thorniest issues that must be resolved to achieve a fiscal sustainability plan.  

So it was heartening last week to see a bipartisan pair of prominent lawmakers – Sen. Ron Wyden (D-Ore.) and Rep. Paul Ryan (R-Wis.) -- release a joint Medicare reform proposal.

At its core is the concept of “premium support” (Wyden and Ryan call it “coverage support”) in which the federal government would pay a set amount to subsidize Medicare premiums. Beneficiaries could elect to remain in the traditional Medicare program or purchase their health insurance on an “exchange” of approved plans, which would be required to offer “at least as comprehensive a benefit as traditional fee-for-service Medicare.” The plans would also be required to issue policies to all seniors who apply (i.e., guaranteed issue).

The level of support would be determined through a competitive bidding process similar to the one currently used to set premiums for the Medicare prescription drug benefit (Part D). There would be a cap on out-of-pocket expenses (catastrophic coverage), and the coverage support “would be adjusted to provide additional...

The current debate over extending the payroll tax cut well demonstrates that policymakers often mean different things when referring to policies that “help” or “expand” the economy. I often hear the words “stimulus” and “growth” used interchangeably, but when economists use them, we typically are making a distinction between different economic goals that apply to different circumstances.

“Stimulus” usually refers to short-term policies to increase demand for goods and services in an economy  operating at less-than-full capacity -- i.e., an economy with high unemployment. In such a recessionary economy, the problem is not a lack of productive resources (capital and labor), but a lack of demand for the goods and services that those resources produce. Under such conditions, public sector deficits -- whether through tax cuts or direct spending -- can be an effective way to increase demand (consumption) and the level of economic activity.

“Growth” usually refers to the long-term expansion of the “supply side” of the economy -- that is, the supply of capital and labor. When the economy is at “full employment,” the binding constraint on it is not the demand for goods and services, but the supply of inputs to production. Fiscal policies that are good at growing the economy over the longer term are therefore those...

The Concord Coalition this week recognized Senators Mark Warner (D-Va.) and Saxby Chambliss (R-Ga.) for their leadership of the "Gang of Six" in the search for bipartisan fiscal reform. 

Former Sen. Sam Nunn (D-Ga.), a member of Concord's board of directors,  presented Chambliss and Warner with the 2011 Paul E. Tsongas Economic Patriot Award at the organization’s annual dinner Wednesday night in Washington.

Nunn praised both senators for their political courage, noting that each had incurred the wrath of some party colleagues for championing reform efforts that would protect the country. Chambliss called this “the issue of our lifetime” and Warner emphasized that the American public had the right to expect responsible corrective measures from their elected officials.

Concord’s 18th Annual Economic Patriots Dinner also featured a panel discussion on the fiscal, economic and demographic challenges facing the country.  The topics included the prospects for the special congressional committee on deficit reduction, which faces a Nov. 23 deadline to submit its recommendations to Congress.

Panel members expressed varying degrees of optimism or pessimism about the likelihood of effective...