Category Archives: Federal Budget

Budget Deficit–Are Tax Increases Needed?

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Common Dreams had an interesting article as the budget deficit as crisis story picks up traction. “Who Ate the Dessert? Deficit Mania Ignores Growth of Income Gap by Neil DeMause.

(note: when reading this material, one has to be be clear whether they are talking about the average budget deficit–which in 2010 is over  a historic $1 trillion– or whether they are talking about the national debt , which is the cumulative total that is now $12 trillion.

http://www.commondreams.org/view/2010/06/14-3 Continue reading »

Federal Expenditures on Elementary-Age Children in 2008

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The Brookings Institution and the Urban Institute just released its study on Federal Expenditures on Elementary-Age Children in 2008 (Ages 6–11). (download at: http://www.brookings.edu/reports/2010/0415_public_investment_isaacs.aspx

The researchers report they are providing “first-ever estimates of federal expenditures” for this age group, and conclude that “the federal government spent $113 billion in outlays and on reductions in taxes on elementary-age children in 2008.”

It is no easy task to locate all possible federal dollars that are spent on children aged 6-11. Often times, this information may not captured.  Medicaid and welfare, for example, do not break down its expenditures based on ages of these children. The researchers acknowledge that they made estimates.

They added up outlays along with what I would call tax expenditures (the taxes that would have been collected if federal tax law did not grant exemptions, tax credits and deductions) to get to their total.

I was surprised to see tax expenditures included here–the $23 billion in reductions in taxes and another $23 billion in refundable portions of tax credits. I have a hard time seeing this as a federal expenditure–there is no clear program or intended purpose specific to these children. The purpose of these tax expenditures is to ease the tax burdens of families. Continue reading »

Where Does Income Tax Money Really Go?

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A handout, prepared by the War Resisters League, had the pie chart shown below. As I looked at, it seemed different from the budget figures I had seen. I am used to seeing $3.8 trillion as the spending budget for Fiscal Year 2011 and a smaller percent spent on Defense.  I was confused initially, then I remembered:  look at what is counted and what is not.

The War Resisters leave out the $726 billion to be spent for Social Security, arguing that that is covered by social security taxes rather than income taxes.  It is therefore misleading, in their view, to include social security in calculating the spending distribution of income tax revenues.  As a result, the proportion spent on Defense is higher (48%) as compared to the proportion (24%) shown on the offical pie chart.

Does the logic make sense? Or does this fit a politial agenda?

Here is the budget chart:

See the fine print chart at: http://www.warresisters.org/files/FY2011piechart.pdf

A Sustainable Deficit?

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I suppose it was inevitable that “sustainable” would find its way into a discussion about the federal budget deficit. What “sustainable” means in any concrete sense, however, is not explained although its use suggests that the search for a balanced budget is over. Yes, economists and others argue over whether deficits are good or bad for the economy. The truth, however, is that no one really knows. The economy is a complex, non-linear system where simple predictions are illusive and science is unable to provide the kind of rock-solid evidence that can guide policy with some probability of success. Instead, the arguments are based on beliefs, assumptions and ideology as well as partisan views of possible election outcomes. What is a Sustainable Deficit? The sustainable deficit is not presented in dollars. Rather, sustainability is defined in terms of the GDP. For the Office of Management and Budget an annual deficit of 3% of the GDP is sustainable, while the Tax Policy Center (2010) suggests that 2% might be more realistic. Getting to either of these goals will be harder if the Bush-era tax cuts are extended but in any case, it will be challenging to find some political acceptable combination of increasing revenue and decreasing expenditures. Although talking of deficits in terms of the GDP is described as the “best way” to understand the deficit, it can be misleading. Understanding what gets counted in the GDP is still not totally clear to me even though I tried to figure it out (see earlier post). It strikes me that it is not an entirely clean measure because some federal spending is counted in the GDP. Does that mean if the federal government borrows more money to spend in the economy, then the GDP will increase? Will the deficit, therefore, look smaller because the GDP is larger? Continue reading »

How to Understand a Trillion-Dollar Deficit

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How to Understand a Trillion-Dollar Deficit, by Barbara Kivait, January 11, 2009 She buy generic viagra online reports that David Schartz looks at time: A ranking of canadian universities pharmacy million seconds = eleven buy generic viagra online and a half years A viagra vs cialis vs levitra reviews billion seconds = 32 years A trillion seconds = 32,000 years Another way to look at the trillion dollar deficit is to see how much each person in the U.S. owes. One order viagra online overnight trillion divided by 300 million = $3,333. Find this article at: http://www.time.com/time/business/article/0,8599,1870699,00.html

In the News: Federal Budget

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The U.S. Congressional Budget Office (CBO) put together this chart on Federal revenues over the past three years from the largest sources: individual, corporate, and Social Insurance (social security) and other. Federal Revenues by Fiscal Year  (click for chart)

How would you summarize this chart?

When putting the 2009 revenue against expenditures, CBO’s Monthly Budget Review, the federal budget deficit was about tagged at $1.4 trillion in fiscal year 2009, nearly $1 trillion greater than the shortfall recorded in 2008. Relative to the size of the economy, the 2009 deficit was equal to 9.9 percent of GDP (the highest since 1945), compared with 3.2 percent in 2008. Both lower revenues and increased spending contributed to the growth in the deficit. 

What are the causes and consequences of this historic budget deficit?