TaxVox: Federal Budget and Economy

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The voices of Tax Policy Center's researchers and staff

Federal Budget and Economy

Stimulus and States

February 10, 2009 –
The compromise stimulus bill likely to win Senate approval attracted a handful of Republican votes by adding tax cuts and trimming spending. Most of the spending cuts came in programs intended to aid states directly, including education assistance. However, with 46 states now in the red, and states expected to run cumulative deficits of more than $350 billion through 2011, that choice seems odd. Keeping state and local governments from raising taxes or laying off workers to meet their balanced budget requirements should be a top priority of any stimulus. Keeping income and sales taxes from rising in the heart of the recession would, at the very least, keep things from getting worse. When the New York Times surveyed economists in December, about two-thirds of economists across the political spectrum endorsed the idea of increasing federal spending to maintain current state budgets or expand education.
Federal Budget and Economy

Stimulus Grade Point Average

February 6, 2009 –
We graded many of the provisions in the Congressional stimulus bills, but resisted producing a bottom line. New York Times columnist, David Brooks, however, used our grades to calculate an overall grade point average (GPA) in today’s paper. Brooks calculated, based on our grades, that the Senate plan scores a 2.26 and adds that it's "not exactly the kind of report card you’re proud to take home to momma." Using the Brooks methodology the House plan would earn a 2.4. You wouldn't brag about that either.
Federal Budget and Economy

Stimulating the Stimulus—unemployment compensation

February 6, 2009 –
The stimulus bill before the Senate would exempt from income tax the first $2,400 of unemployment compensation that people receive in 2009. Because the exclusion reduces their taxable income, higher bracket taxpayers get a bigger break than those with lower incomes. And very low-income households that have no tax liability would get no benefit at all.
Federal Budget and Economy

Building a Trillion Dollar Bucket

February 5, 2009 –
I am beginning to understand why the stimulus plan is so bloated with stuff that is so obviously not stimulus. It was designed backwards. Congress and President Obama could have identified a list of those proposals that are both timely and targeted, figured out what they would cost, and assembled them into a stimulus measure. Instead, they are doing what Washington always does with big bills such as this: They first invented, out of whole cloth, a number for the size of the stimulus. Having capped the price at a roughly a trillion dollars, they are now horse trading to choose the individual tax cuts and spending to fit that pre-arranged cost target. As my colleague Bill Gale puts it, first they built the bucket, now they are trying to fill it.
Federal Budget and Economy

Stimulating the Stimulus—child credit and EITC

February 4, 2009 –
The stimulus bill working its way through Congress would make both the child tax credit (CTC) and the earned income tax credit (EITC) available to more low-income workers. The CTC would phase in at lower income levels for the poorest working families, raising after-tax income for the neediest and most likely encouraging them to spend additional income. The EITC would increase for larger families, also giving more cash to families likely to spend quickly.
Individual Taxes

Hitching a Ride on the Stimulus Train

January 29, 2009 –
This will surprise nobody who follows what is optimistically called the budget process, but the economic stimulus package wending its way through Congress has become the vehicle for an astonishing array of stuff. It’s become even better than emergency supplemental appropriations, which have been used to fund decidedly predictable items, like the decennial census and continuing outlays for the Iraq war (long after the initial shock and awe had worn off).
Federal Budget and Economy

It is About Credit Markets, Not Just Stimulus

January 27, 2009 –
Washington has kicked off a perfectly predictable donnybrook over stimulus. Democrats, who spent the past eight years bashing George Bush for turning a Clinton-era surplus into a big deficit, are now defending what will be nearly $1 trillion in new tax cuts and spending. Republicans, who presided over decades of deficits, suddenly are worried about the debt we are leaving to our grandchildren.
Federal Budget and Economy

Grading the Stimulus

January 26, 2009 –
My TPC colleagues—most having taught at some point in their careers—couldn’t resist. They’ve given grades to the major tax provisions of the stimulus bill now working its way through Congress. While you can argue over the specific grades (and we surely did), the benefit of this exercise is that it forces you to look at the relative value of each of the elements of the plan. For a first pass, TPC graded the Ways & Means bill, and concluded that the best proposals of the bunch are those that give temporary tax relief to low-income families. It makes sense, since they are the most likely to spend the money they receive. As I noted in a recent post, even these are far from perfect, but they should help to get the struggling economy get back on its feet.
Individual Taxes

Will the Tax Cuts Help Fix the Economy?

January 22, 2009 –
How much will the $300 billion in tax cuts approved today by the House Ways & Means Committee really stimulate the economy? They will help some, but don’t expect them to accomplish a lot. I’d give the overall plan a Gentleman’s C. Some provisions would channel money to low-income people most likely to spend it, but deliver the cash too slowly. Others distribute the funds relatively quickly, but give an awful lot to wealthier taxpayers who are least likely to spend it.
Federal Budget and Economy

Will Obama “Bend the Curve” on Entitlement Spending?

January 19, 2009 –
I am sure Barack Obama will deliver a stirring Inaugural address tomorrow. However, Obama’s most important remarks since his election came in an interview the other day with The Washington Post. There, he promised to convene a bipartisan fiscal summit in February. This has the potential to be the most important step of his Presidency. Yes, at least as important as fixing the immediate economic mess.