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Federal Budget and Economy

Did the Stimulus Work?

August 27, 2009 –
Alan Auerbach and Bill Gale wrote an interesting new paper that tries to answer an important and timely question: Does fiscal stimulus actually work? Their conclusion: It doesn’t do a bad job at all. In a paper prepared for the Fed’s August 20-22 Jackson Hole conference, Alan and Bill conclude that while the evidence is still a bit dicey, there is a strong case to be made for well-timed tax cuts and spending increases.
Federal Budget and Economy

The Budget Numbers that Matter

August 25, 2009 –
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.
Federal Budget and Economy

What about the Spending Side?

August 17, 2009 –
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.
Federal Budget and Economy

Why We Won’t Eliminate the Deficit with Corporate Tax Revenues

August 13, 2009 –
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.
Federal Budget and Economy

How We Won’t Eliminate the Deficit

August 12, 2009 –
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.
Federal Budget and Economy

Cash, Clunkers and the Environment

August 11, 2009 –
Commentors on last week's post on Cash for Clunkers have argued that the newly-expanded program is better than other government subsidies because of its positive environmental effects. So I did a little research and it turns out that the “green” benefits of this program may be wildly overblown.
Federal Budget and Economy

Junk Cash for Clunkers

August 6, 2009 –
Washington is about to spend another $2 billion on cash for clunkers. I wish, instead, lawmakers would declare the program’s first $1 billion a roaring success, take a deep bow, and move on. In fact, the first $1 billion was not a total failure. It did get help bring auto inventories down, especially for small cars, and, as intended, it took some gas guzzlers off the road.
Federal Budget and Economy

Loose Handcuffs

July 30, 2009 –
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.
Federal Budget and Economy

Another stimulus? Say it Ain’t So.

July 9, 2009 –
Congressional Democrats, having apparently lost patience with the first Obama stimulus, are beating the drum for yet another round of government money to pump up the still-lagging economy. They need to take a deep breath. Lori Montgomery wrote a nice piece in yesterday’s Washington Post explaining why. Using some data from Mark Zandi at Economy.com, Lori reports that barely $100 billion of last winter’s nearly $800 billion stimulus has made its way into the economy. Until the rest is spent, why would we want to run up the debt by hundreds of billions more?
Federal Budget and Economy

Gale and Auerbach’s “Problematic” Budget Outlook

June 23, 2009 –
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.