Do not read the new CBO budget projections by the dark of night. Instead, pick a bright sunny day and keep a significant other or perhaps a pet by your side. A good stiff drink wouldn’t hurt. If Stephen King were a budget wonk, A Preliminary Analysis of the President’s Budget and an Update of CBO’s Budget and Economic Outlook would be his kind of book. The headline is CBO’s projection that the deficit will hit $1.8 trillion this year under President Obama’s policies. That’s a deficit of more than 13 percent of GDP—twice as large as any annual deficit since 1946. But that’s far from the scariest number in this report. Far more troubling to me is what will happen after the economy recovers and fiscal policy returns to what I suppose will be the New Normal.    more »

In the presidential campaign, Barack Obama promised he’d cut taxes for 95 percent of all Americans. And, so far at least, it looks like he’s coming close to meeting that goal. I think this sort of largess is a mistake given the nation’s long-run fiscal problems. But GOP claims that Obama is trying to raise taxes for many Americans are bogus. TPC has just completed a major analysis of the tax provisions of the President’s 2010 budget. We found that, compared to current law, 91 percent of taxpayers would get a tax cut under the Obama plan. That is, they’d pay less tax than they would if the Bush tax cuts expired as scheduled in 2010 and the Alternative Minimum Tax is allowed to bite millions more taxpayers.    more »

President Obama’s promise of transparency in government is a laudable goal after too many years of near-obsessive secrecy by the Executive Branch. Unfortunately, at least when it comes to his tax agenda, the president’s new budget falls far short of that vow. Too many tax proposals are written in Inside-the-Beltway code. For many provisions, there is no description at all in the 134-page budget. Most can be found only by deciphering the tables in the back. Some items worth hundreds of billions of dollars appear only as mere footnotes. Others are nothing more than numbers in revenue tables. There are no real proposals at all.    more »

There are already signs that a key tax element of President Obama’s budget--his proposal to limit to 28 percent the value of all tax deductions—may not survive on Capitol Hill. And if it is allowed to die, Congress may find itself staring squarely at another hard-to swallow tax hike—trimming the tax exclusion for employer-sponsored insurance. Key Republicans have strongly objected to the curb on deductions. Powerful Democrats, including Finance Committee chairman Max Baucus (D-Mt), are less than enthusiastic. Charities that fear they will lose contributions are gearing up for a big fight, even though TPC estimates that gifts would decline by only about 2 percent. And in the face of this criticism the Administration has signaled that it may not fight very hard to save the proposal. "We recognize there are other ways to do this," Treasury Secretary Tim Geithner told the Finance panel yesterday.    more »

President Obama’s budget would eliminate a small but meaningful program for low-income families – the Advanced Earned Income Tax Credit (AEITC). A far better idea would be to expand the program. This credit allows eligible families to receive a portion of their Earned Income Tax Credit (EITC) throughout the year through a reduction in tax withholding, so they don’t have to wait until they file their tax returns to get the extra cash. In 2009, the program could boost a family’s take-home pay by up to $35 a week.    more »