TaxVox: Federal Budget and Economy

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The voices of Tax Policy Center's researchers and staff

Federal Budget and Economy

We Can’t Always Get What We Want: Why Governing Americans is So Hard

July 13, 2010 –
The conventional wisdom is that Americans are fed up with their government. But our demands on policymakers are so inconsistent and irrational that we make governing nearly impossible. We hate big deficits, but oppose the actual tax increases or spending cuts that we need to dam the flood of the red ink. We are furious that government passed an $800 billion stimulus last year, but feel lawmakers are not doing enough to get the economy going. We want government to “do something” about the gulf oil spill but reject government interference in private business.
Federal Budget and Economy

Why Taxes Are Going Up

July 7, 2010 –
It’s hard to imagine that spending restraint alone can solve America’s long-run fiscal woes. Facing an aging population and rising health care costs, the federal government will continue to expand even if policymakers take serious steps to trim spending. That’s why policy wonks are working so hard to evaluate ways to raise more revenue. Cutting back on loopholes and other tax expenditures, taxing carbon emissions, introducing a value-added tax – all of these deserve attention in case America decides that it wants to finance a substantially larger federal government.
Federal Budget and Economy

The Senate Struggles with Unemployment Benefits

July 6, 2010 –
When the Senate returns next week, it must confront a bit of unfinished business—what to do about extending unemployment benefits. As fans of the ongoing soap opera that is the World’s Greatest Deliberative Body already know, the Senate failed to pass the unemployment bill before rushing out of town for its Fourth of July holiday. And just before the Labor Department issued a discouraging report that suggested private job creation may be slowing.
Federal Budget and Economy

How Bad is the Budget Outlook?

July 1, 2010 –
The Congressional Budget Office offers two visions of the future in its new long-run budget outlook. The first imagines a world in which lawmakers take pay-as-you-go budgeting really seriously. The budget baseline assumes that existing laws execute exactly as written: all the 2001 and 2003 tax cuts expire, the alternative minimum tax hits millions more families, real bracket creep drives taxes far above historical norms, Medicare payments to doctors are cut by more than 20%, discretionary spending grows only with inflation, and all the offsets in the recent health legislation – taxes on “Cadillac” health plans, cuts in provider payments, etc. – happen as scheduled. If Congress tries to avoid any of those changes, it would have to pay for them through offsetting spending cuts or tax increases.
Individual Taxes

The Homebuyers Credit: Is It Better to Laugh or Cry?

June 24, 2010 –
For two years, the homebuyer credit has been in the running for Washington’s worst tax policy idea. Now, new evidence about this bit of legislative bilge suggests it may be time to retire the trophy. The Commerce Department reports the new homes market collapsed in May after booming in March and April (chart). Why? Well, in early spring, in response to an intense marketing campaign by the real estate and mortgage industries, tens of thousands of buyers accelerated home purchases to take advantage of this sweet tax give-away (as much as $8,000 for some buyers) before the credit expired on April 30. Then, just as most sentient economists predicted, the market dried up. Actually, it didn’t just dry up. It became the Death Valley of housing.
Federal Budget and Economy

Gaming the Budget Window

June 23, 2010 –
Faced with continuing gridlock over a soup-to-nuts extenders bill, congressional leaders have gotten creative in their legislative strategy. Exhibit A is a stripped-down bill that passed the Senate by unanimous consent on Friday. This bill would temporarily reverse the 21% cut in Medicare physician payment rates that took effect earlier this month. The price tag for this six-month “doc fix” is a bit more than $6 billion over the next ten years.
Federal Budget and Economy

Steny Hoyer and the Deficit: “We’re Lying to Ourselves and Our Children”

June 22, 2010 –
Maryland Democratic congressman Steny Hoyer is something of a throwback. In an age of ideological extremes, the House Majority Leader is a moderate. At a time when elected officials are held in low esteem, the #2 House Democrat proudly serves in his fourth decade as a legislator. And when incendiary speech is the ticket to political stardom, Hoyer is far more comfortable counting votes in legislative backrooms than delivering red-meat polemics.
Federal Budget and Economy

The Non-Jobs Bill

June 17, 2010 –
Congress' effort to pass a jobs bill stalled in the Senate on Wednesday. In part, the upper chamber tied itself into Senate-like knots thanks to the usual partisan wrangling. But the proposal has also rekindled a debate over the need for more economic stimulus versus fear of rising deficits. This argument is important and healthy, but wildly overblown in the context of such a small and poorly-targeted bill.
Federal Budget and Economy

The Tea Party: Tax Cuts and Smaller Government, But More Red Ink

June 8, 2010 –
Treasury Secretary Tim Geithner, among others, thinks the tea party movement might help drive deficit reduction. I disagree. I don’t believe most tea party leaders or candidates are remotely interested in slowing the flow of federal red ink. They are plainly interested in tax cuts—a core belief that appears repeatedly on Websites, position papers, and speeches throughout the movement. And while tea partiers say they favor smaller government, many in fact propose to shrink it in only trivial ways—by cutting earmarks or waste and abuse. Candidates elected on platforms supporting very large tax cuts and small spending reductions are likely to oppose aggressive efforts to reduce deficits, not back them. While some analysts see the tea partiers as the 21st century progeny of Ross Perot’s fiscal conservatism, nothing could be further from the truth.
Federal Budget and Economy

How Blurry is the Line between Monetary and Fiscal Policy?

June 1, 2010 –
Economists have traditionally drawn a sharp distinction between monetary and fiscal policy. Monetary policy should try to promote growth and limit inflation by setting short-term interest rates, managing the money supply, and providing liquidity during times of financial stress. Fiscal policy should also encourage growth and, more broadly, promote the general welfare through careful choices about spending, taxes, and borrowing. The Federal Reserve has responsibility for monetary policy, while Congress and the President handle fiscal policy.