Both CBO and OMB put out their updated budget forecasts this morning. Getting past all the confusion about baselines, the news is grim. OMB projects more than $9 trillion in cumulative deficits over the next decade if the President’s agenda is enacted. A few things to keep in mind as you wade through the carnage.    more »

Rosanne Altshuler and I have argued in recent posts that Washington will be hard pressed to close our ongoing budget gap with politically palatable tax increases. (Is that an oxymoron?) Neither raising the individual income tax nor boosting corporate levies will erase the deficit. But what about the spending side of the budget? We at the Tax Policy Center naturally focus on taxes but we do understand that cutting a dollar of spending has pretty much the same effect on the deficit as raising another dollar in taxes.    more »

Yesterday my colleague Bob Williams blogged on how difficult it will be to dig ourselves out of our enormous budget hole. He examined CBO’s biennial Budget Options report, which contains a list of “revenue options” for modifying Federal taxes. Bob focused on the year with the smallest deficit over the ten year budget window which happens to be 2012. In that year, CBO predicts we will run a deficit of “only” $633 billion. The individual income tax raises the bulk of federal revenues, so naturally Bob looked at incremental reforms of those levies.    more »

Last week the Congressional Budget Office issued a new edition of Budget Options, its biennial publication detailing hundreds of proposals that would raise or lower taxes and spending. Numbers in the revenue chapter of the nearly-300-page book show just how difficult it will be to raise the taxes needed to fill the huge deficit hole that we’ve dug for ourselves.    more »

Way back in the last century, PAYGO rules in the 1990 Budget Enforcement Act (BEA) helped control spending and contributed significantly to four years of budget surplus. Since BEA expired after 2002, looser PAYGO rules have applied and Congress has repeatedly chosen to ignore them. That was easy since violating PAYGO could only trigger a point of order, which was pretty easy to overcome, at least in the House. The Senate requires 60 votes to beat back a point of order but senators got around that by putting tax cuts and spending increases in budget resolutions, which are not subject to points of order.    more »

Bill Gale and Alan Auerbach are nice guys, but they sure know how to ruin a beautiful summer day. I’ve spent the morning reading through their latest long-term budget forecast. It’s not even Noon and I think I need a drink. Gale, who is TPC’s co-director, and Auerbach, who heads the Burch Center for Tax Policy and Public Finance at Berkeley, have done this exercise for the past few years--each iteration more depressing than the last. The story this year: Long after the economy recovers and returns to full employment, long after the TARP and the auto bailouts are history, the U.S. will face massive and unsustainable deficits. Don’t let anyone tell you this is a temporary problem that will fade with the recession. It isn’t and it won’t.    more »

As I promised in last Friday’s TaxVox post, here is TPC’s estimate of the 2012 distribution of President Obama’s tax proposals in the 2009 budget, measured against the administration’s chosen baseline. That baseline looks a lot like current policy: extend the Bush tax cuts, index and make permanent the 2009 estate tax, and permanently patch the alternative minimum tax by indexing forward the 2009 parameters.    more »

Following last month’s release of the Treasury Green Book, the Tax Policy Center reworked its distributional analysis of the tax proposals in President Obama’s 2010 budget. We learned many new details about specific tax provisions, including the practical definition of who has enough income to face higher taxes. The bottom line? You have to have a lot of income to be in Obama’s crosshairs.    more »

Here we go again. I posted yesterday on a new TPC analysis of the tax cuts in President Obama’s proposed 2010 budget. The conclusion: Nearly everyone, even most of the very wealthy, would enjoy a big tax break. This, I suggested, was not smart, given the nation’s huge deficit and Obama’s ambitious priorities. Not surprisingly, a commenter—AMTbuff—called me to task. While many of these revenue provisions represent tax cuts relative to current law, they are not when compared to current policy—that is, assuming all the 2001 and 2003 tax cuts are made permanent, the AMT is patched into the future, etc. According to AMTbuff, “using current law as the baseline is misleading [since] neither the public nor any experts expect all tax rates to spring back to pre-2001 levels.”    more »

Everybody gets a tax cut! To look at TPC’s latest estimates of the tax provisions of President Obama’s 2010 budget, you’d think there was no deficit of $1.84 trillion, or that the White House has no need to pay for an ambitious health reform plan. Or more education spending. Or more infrastructure construction.    more »

Californians vote tomorrow on six ballot measures addressing their state's perennial budget problems. If nothing passes, California will face a $20 billion budget shortfall. If everything passes, the deficit drops to—drum roll, please—$15 billion. Big numbers but not unusual for the Golden State. The bigger issue is whether California, or any other state, should budget by initiative.    more »

Taxes aren’t just for grown-ups. In fact, our new Urban/Brookings study estimates that 40 percent of all federal expenditures spent on infants and toddlers flows through the tax system. That’s more than $22.8 billion. The two main programs that drive this spending are the earned income tax credit (EITC) and the child tax credit (CTC). Although both allocate fairly large percentages (18%) of their total program expenditures to families with infants and toddlers, they differ dramatically in the benefits that are refundable and those that are not. The EITC is fully-refundable, so in 2007 (the most recent year of available data), almost 90 percent of benefits received by families with infants and toddlers ($7.1 billion) came as a tax refund. In contrast, only one third of the partially refundable CTC benefits ($2.8 billion) were refundable, so most of CTC’s benefits reduced tax liability but failed to put cash back into needy families’ hands.    more »

Medicare’s Part D drug benefit is going to cost taxpayers a lot of money. A really, really lot of money. You can find the story deep in the bowels of the Medicare Trustees report that was released earlier this week. It is a nice little case study of how a well-intentioned government program can add tens of billions of dollars annually to the federal deficit. And it is a cautionary tale of how hard it will be to bring medical costs under control, despite the promises of the Obama Administration and industry lobbyists.    more »

President Obama said last night he was going to request $1.5 billion to help address the swine flu outbreak. I wish he had also promised to find the dough to pay for this initiative. But, he didn’t. This follows a troubling, and ongoing, pattern. Obama and the congressional Democrats say they recognize the consequences of burgeoning deficits and promise to address the problem—next time.    more »

I was quoted in the New York Times yesterday, which is kind of fun. Many of my friends read the Times, and it’s a great way to make new friends, and enemies.    more »