Surplus Tax Policy? Surplus Tax Policy?

Size: px
Start display at page:

Download "Surplus Tax Policy? Surplus Tax Policy?"

Transcription

1 Surplus Tax Policy? Surplus Tax Policy? Abstract - The emergence of large and apparently growing budget surpluses represents a paradigm shift for tax policy. This speech examines and dismisses some contrarian views about the effect of surpluses on fiscal well being, and then addresses three questions: (1) Is the surplus real? (2) Do surpluses or deficits matter? (3) Should surpluses change the rules of tax policy? The speech concludes that the Administration s fiscal year (FY) 2000 budget framework, if enacted, would advance fundamental tax policy principles of fairness, simplicity, and economic growth without abandoning the fiscal discipline that brought us a strong economy and budget surpluses. Leonard E. Burman Department of the Treasury, Washington, D.C National Tax Journal Vol. LII, No. 3 INTRODUCTION I want to start by thanking Diane Rogers and the symposium committee for putting together such a great and timely conference. The theme of the conference Tax Policy in a Time of Surplus suggests some important questions. Should tax and budget policy change because we have budget surpluses? Are the old tax policy principles of fairness, efficiency, and simplicity somehow outdated because fiscal discipline is no longer a dire imperative? The answer to the first question is that a surplus creates opportunities to deal with serious long-run policy concerns, but that a radical shift in policy in particular, spending a large part of the projected surplus either directly or through tax cuts is unwarranted. The answer to the second question is that there is no reason to surplus our tax policy principles. Any change in tax and budget policy should be guided by those principles. My talk will discuss the new paradigm of tax policy in a time of surplus, some amusing but largely irrelevant concerns that have been raised about persistent budget surpluses, and the implications for tax and budget policy of the projected surpluses. I will conclude by discussing how the program the President announced in the State of the Union address fits the new tax policy opportunities and constraints. A NEW PARADIGM When I started my career, people were preoccupied with soaring budget deficits, rampant inflation, and stubbornly persistent unemployment. Inflation and unemployment diminished in the 1980s, but deficits exploded. In part, deficits 405

2 grew because of supply-side economics the idea that taxes suppress the economy so much that tax cuts are effectively free. This created a very undisciplined environment both for tax cuts and government spending, and deficits ballooned as a result. Despite some corrective efforts such as the Deficit Reduction Act of 1982 and the Gramm Rudman Hollings Act of 1985, the national debt grew from 26 percent of gross domestic product (GDP) in 1980 to 50 percent by At the end of 1993, the national debt stood at $3.2 trillion. Now, after three painful deficit reduction bills (in 1990, 1993, and 1997), nearly a decade of fiscal discipline, and what will soon be the longest economic expansion in history, we are running surpluses ($69 billion in 1998). Surpluses in the unified budget are forecast to persist for nearly 50 years. Great news, right? Well, don t fall prey to irrational exuberance. Policy observers could not let the end of deficits happen without sounding the alarm. SURPLUS MANIA (AND OTHER NEUROLOGICAL DYSFUNCTIONS) 406 NATIONAL TAX JOURNAL So what could be wrong with moving from budget deficit to surplus? First, the paradigm shift is confusing. The Congressional Budget Office ceased publication of its perennial best seller Options for Reducing the Deficit while they tried to come up with a new title to reflect a deficitless reality. (After a year s hiatus, the series reemerged with a new name, Maintaining Budget Discipline: Spending and Revenue Options.) Second, some policy analysts have predicted dire consequences of persistent surpluses. Davidson and Galbraith (1999), in The Dangers of Debt Reduction, warn that debt reduction is basically impossible. If the government tried to save the surplus, the contractionary government policy would depress the economy, which would in turn reduce or eliminate the surplus. These authors also argue that persistent deficits have served a valuable purpose by creating an ample supply of safe and liquid assets Treasury bills (Tbills) which are essential for the proper functioning of financial markets. An even more hysterical article, Surplus Mania: A Reality Check, by Wray (1999), argues that debt is good for the economy. The government has been in debt every year except one since 1776 and our economy has outpaced the entire world, so debt must not be bad. Moreover, every period of significant debt reduction has been followed by a depression and every depression has been preceded by surpluses. This, Wray concludes, represents clear and convincing evidence of the folly of debt reduction. Sometimes economics lives up to its reputation as the dismal science. There are serious problems with the doom and gloom scenarios. First, even under the best of circumstances, we have several decades before we have exhausted the national debt and the associated supply of Treasury securities. Although financial markets currently find T-bills extremely useful as a basis for their hedging and arbitrage operations, it is hard to imagine that they would be unable to develop an alternative over the next 20 years. Besides, balanced budgets do not preclude the government from issuing securities. Many state governments are required by their constitutions to balance their budgets, but they still issue tax-exempt bonds to finance capital investments. Thus, if financial markets need T-bills to run efficiently, the federal government could continue to produce them, even while maintaining fiscal responsibility. I am not advocating such a policy, for a variety of reasons, but the point is that the need for a safe and liquid asset should not be the rationale for failing to pay down the debt. That would be an extreme case of the tail wagging the dog. The surpluses-cause-depressions hypothesis would make a fine test question

3 Surplus Tax Policy? for an undergraduate econometrics course, but should not be taken seriously as a matter of policy. The reason that surpluses have preceded economic downturns is simple. It is called the business cycle: expansions are followed by contractions. The correlation between debt reduction and depression is testament to the fact that we haven t run a substantial surplus in a very long time since the days when the nation was incompetent at managing its monetary and fiscal policy. Expansions, except in periods of extreme fiscal profligacy, tend to improve the budget situation that is, lead to surpluses and contractions worsen the budget create deficits. That doesn t mean that surpluses cause deficits or vice versa. Put differently, correlation does not imply causality. End of econometrics lesson. WHAT ARE THE IMPLICATIONS FOR TAX POLICY OF SURPLUSES? So, as a matter of tax policy, what should we make of budget surpluses? In this paper, I ll break down the question into three parts: Is the surplus real? Do surpluses or deficits matter? Should surpluses change the rules of tax policy? Is the Surplus Real? 407 A fundamental question is whether we are getting carried away with all this talk about surpluses. So far, we have experienced a surplus for exactly one year compared with two decades of deficits. The paradigm shift might be premature for at least two reasons: (1) the extraordinary economic conditions that led to the surplus may not persist; and (2) surpluses in a political environment may tend to be self-correcting. Auerbach and Gale (1999) argue the first point. A key reason that the deficit situation has reversed itself with such startling speed is that the economy is doing extraordinarily well. Real GDP is growing at an annual rate in excess of four percent after decades of lackluster growth. The unemployment rate most recently is about 4.3 percent and inflation nearly nonexistent. (Traditional macroeconomic theory suggests that this coincidence is impossible, given that the NAIRU the nonaccelerating inflation rate of unemployment is around 5.3 percent.) Individual income tax receipts are near a historic high as a percentage of GDP despite the fact that most families face lower tax burdens than they have in decades. Federal income tax rates on a typical family are lower now than at any time since A family at half the median income faces no income tax liability at all due to the earned income tax credit and the child credit. Even a family at twice the median income faces lower income tax rates now than at any time since Thus, the entire rise in income tax revenue is coming from the top of the income tax distribution, which has experienced explosive growth in almost all sources of income, but especially earnings and capital gains. Both of these factors are driven in large part by the extraordinary growth in the stock market. So, under the unlikely event that the stock market tanks and the economy goes into a tailspin, the surpluses will get smaller. It s worth noting, however, that the Administration s forecast for the surplus is not a rosy scenario. The macroeconomic forecast for the past several years has anticipated a return to modest growth rates, and those expectations have always been surpassed. The revenue forecast assumes that the share of taxes paid by people with high incomes will move back toward its historical norms also an unfulfilled expectation. In consequence, the seemingly optimistic forecasts have repeatedly proven to be too cautious in recent years. That trend might reverse itself at any time, but there is no evidence that it is happening yet.

4 The current political debate may determine if surpluses are self-correcting in a political environment. Can politicians resist the urge to spend the surplus or cut taxes? If they can t, then we may have a problem. If deficits are hard to solve, as the experience of the past two decades suggests, and surpluses are self-correcting, then serious debt reduction is never going to happen. The right answer is to adjust to surpluses as slowly as to deficits, which means that most of surpluses should be saved rather than spent or rebated in the form of lower taxes. I find the general agreement that a significant portion of the projected surpluses should be reserved for Social Security and Medicare a very positive signal in this regard. Thus, on both economic and political grounds, there is reason to think that the surplus is real and will not be dissipated immediately. Do Surpluses or Deficits Matter? Theoretical dynamic macroeconomic models have a peculiar kind of government budget constraint called a transversality condition. The transversality condition requires that tax and spending policy allow the budget to be balanced over an infinite horizon. The government could run growing deficits for a million or a billion or a trillion years, just so long as it retains the ability to pay off the debt. The practical implication is that deficit policies that cause GDP to grow more than the debt are optimal... forever. The chimerical theory that such policies exist and that the government can find and implement them underlies supplyside economics. That theory was tested in the early 1980s in an experiment sometimes called Reagonomics. Comparing the 1980s, when the debt exploded while the economy grew at a healthy pace, with the 1990s, when the debt fell as a share of GDP and the economy grew at an amazing pace, I d vote for fiscal responsibility. 408 NATIONAL TAX JOURNAL In the wacky theory department, one called Ricardian equivalence says that deficits don t matter because people will adjust their saving to offset government borrowing. Possibly, the disappearance of personal savings might be a response to an increase in government saving, but that doesn t explain why national saving plummeted in the 1980s at the same time that the debt was mounting. In fact, with personal saving vanishing, the need for government saving (or, at least, to rein in government borrowing) is especially acute. National saving is the sum of private saving (done by individuals and businesses) and government saving (debt reduction). Increased saving from either source reduces our reliance on foreign capital and thus improves our trade balance. It also means that the capital stock is growing to help offset the declining labor supply that will occur when the baby boom ages. Finally, the existence of surpluses matters because it creates opportunities that do not exist when there are deficits. Should Surpluses Change the Rules of Tax Policy? How should we choose the right policy? We should apply the basic principles of tax policy: fairness, simplicity, and economic growth. Tax policy in a time of surplus presents a real opportunity to make the tax system fairer and simpler and to strengthen the economy. A fundamental question that arises when we have surpluses is, should we abandon or modify the Budget Enforcement Act (BEA) rules? The BEA limits spending and requires that tax revenues pay for mandatory programs, such as Medicare and Social Security. In particular, tax increases can t be used to pay for more discretionary spending, even if taxes more than cover mandatory spending. The BEA has been effective at reducing the deficit, which is good. One way it has

5 Surplus Tax Policy? done this is by severely limiting discretionary government spending, but those limits also restrain policy choices in possibly undesirable ways. For example, the budget rules create a strong incentive to channel new spending through the tax side of the budget. Sometimes, it might be fairer, simpler, and more economically efficient to replace a tax expenditure with a direct expenditure program, but that choice is not available. But if we scrapped the budget rules, we might ironically find ourselves back in the supply-side world that launched the explosion of public debt. If not in a balanced budget context, how should new tax cuts or expenditures be evaluated? THE ADMINISTRATION S APPROACH The President approached this problem in his budget by establishing a new set of budget guidelines. First, not a penny of the surplus would be touched until Social Security is reformed. Second, a major part of Social Security and Medicare reform would be accomplished through debt reduction. As a result, 77 percent of predicted surpluses over the next 15 years would actually be saved. In fact, under the President s plan, the national debt would be eliminated by As compared with tax cuts, debt reduction benefits everyone, because future taxes will be lower, the economy will be stronger, and the Social Security and Medicare guarantees that are so important to working people would be absolutely secured. With personal saving at a zero rate, the economic argument for the government to bolster public saving is extremely persuasive. Thus, debt reduction is efficient and fair. It is also prudent given the uncertainty of the long-run surplus projections. The budget would also set aside ten percent of the surplus for new Universal Savings Accounts (USAs), a program designed to increase national retirement savings. This progressive tax credit is the rare 409 tax expenditure in which the distributional objectives and the efficiency objectives are in sync with each other. To be efficient, the savings created must be new savings not savings financed by withdrawals from other accounts or increased borrowing. Fairness requires targeting the tax incentive at lower-income people. Because they are the least likely to have other forms of savings, their contributions to USAs would be almost all new savings rather than asset shifting. Universal Savings Accounts Here is how the new USAs would work. Eligible workers and their spouses would receive an automatic government contribution of $300 in the form of a refundable tax credit deposited directly into their USAs. The automatic credit would be phased out between $40,000 and $80,000 of adjusted gross income (AGI) for joint filers ($20,000 to $40,000 for single filers; $30,000 to $50,000 for head of household filers). Individuals could also make voluntary contributions to their USAs. An individual s voluntary contributions to a USA would be matched in the form of a refundable tax credit deposited directly into the USAs. Lower- and moderate-income individuals would receive a dollar-for-dollar match. The match rate would phase down to 50 percent over the same income ranges as the phaseout for the automatic contribution. Highincome people covered by pensions would be ineligible. Total USA voluntary and government contributions (including the credits) to a USA would be capped at $1,000 per year. Workers are eligible if they are not the dependents of other taxpayers, have at least $5,000 of earnings (combined earnings on a joint return), and are between the ages of 18 and 70. Withdrawals are not permitted until age 65, and contributions are not permitted after withdrawals have commenced.

6 NATIONAL TAX JOURNAL Special provisions encourage workers with contributory employer pension plans, such as 401(k) and 403(b) plans, to participate in those plans. They can use their contributions to those plans as the basis for USA tax credits. There are no employer mandates of any sort, but employers who wish to set up payroll deduction options to allow workers to make periodic contributions to a USA would be able to do that. Workers could also designate contributions to their USA on their tax returns, for example, by channeling a portion of their refund into the account. Workers would also have the option of making direct contributions to USAs, against which they could claim a refundable tax credit on their tax return. Individuals would have a choice of investment options for their USA contributions, just as federal employees do under the Thrift Savings Plan, including a stock index fund, a bond fund, and an interest bearing account. Seventy-three million people without access to pensions would have access to USAs. The ability to channel refunds into the accounts combined with the large match rate would provide a very strong incentive for lower- and moderate-income people to save for retirement, and designating saving on a tax return would be very simple. Moreover, the accounts would provide a significant supplement to Social Security for millions of people who rely on it entirely. An individual who contributed only the automatic $300 per year could have $38,000 in today s dollars after a 40- year working career. That is enough to produce an after-tax annuity of $250 per month. Someone who contributed the maximum of $1,000 per year, including automatic and matching tax credits, would have $126,000 in the account at retirement. A couple would have a retirement nest egg of over a quarter of a million dollars. Compared with other proposals for tax cuts, the President s proposal for USAs would be much fairer. The proposed 10 percent across the board tax cut, for example, would bestow 66 percent of its benefits on the top 20 percent of taxpayers. The proposal for USAs would provide only 20 percent of the benefits to that group. The USA proposal would help the economy, especially in the long run, by increasing private saving. This increased saving will help increase the capital stock that will be vital to continued prosperity once the baby boomers retire. Other tax cut proposals would stimulate consumption, arguably bad policy for both the short and long run. And the proposal would provide the easiest way to save for retirement available for the 73 million people not covered by employer pension plans, and it would also encourage workers who have access to employer plans to participate in those plans. CONCLUSIONS After two decades of struggling with deficits, the economy now faces the prospect of surpluses for the foreseeable future. Those surpluses reflect extraordinarily good news about the economy and a reward for the fiscal discipline of the 1990s. The surpluses present challenges and opportunities. The main challenge is how to take advantage of the opportunities while advancing the basic tax policy principles of fairness, simplicity, and economic growth, and without abandoning fiscal discipline. The President s proposal for Social Security reform and USAs meets that challenge. Acknowledgments I thank without implication Joel Platt, Marti Thomas, and David Wilcox for 410

7 Surplus Tax Policy? helpful comments. Norma Coe provided invaluable research assistance. REFERENCES Auerbach, Alan J., and William G. Gale. The Case Against Tax Cuts. Brookings Policy Brief. Washington D.C.: The Brookings Institution, March Davidson, Paul, and James K. Galbraith. The Dangers of Dept Reduction. The Wall Street Journal (March 3, 1999): A16. Wray, L. Randall. Surplus Mania: A Reality Check. Levy Institute Policy Notes. Annandale-on-Hudson, NY: Jerome Levy Economics Institute of Bard College, 1999/3. 411

8

The 2004 Report of the Social Security Trustees: Social Security Shortfalls, Social Security Reform and Higher Education

The 2004 Report of the Social Security Trustees: Social Security Shortfalls, Social Security Reform and Higher Education POLICY BRIEF Visit us at: www.tiaa-crefinstitute.org. September 2004 The 2004 Report of the Social Security Trustees: Social Security Shortfalls, Social Security Reform and Higher Education The 2004 Social

More information

Congressional Budget Office s Preliminary Analysis of President Obama s Fiscal Year 2012 Budget

Congressional Budget Office s Preliminary Analysis of President Obama s Fiscal Year 2012 Budget Congressional Budget Office s Preliminary Analysis of President Obama s Fiscal Year 2012 Budget SUMMARY The Congressional Budget Office s (CBO) Preliminary Analysis of the President s FY 2012 Budget released

More information

INTERACTION OF AUTOMATIC IRAS AND THE RETIREMENT SAVINGS CONTRIBUTIONS CREDIT (SAVER S CREDIT)

INTERACTION OF AUTOMATIC IRAS AND THE RETIREMENT SAVINGS CONTRIBUTIONS CREDIT (SAVER S CREDIT) INTERACTION OF AUTOMATIC IRAS AND THE RETIREMENT SAVINGS CONTRIBUTIONS CREDIT (SAVER S CREDIT) A Report Prepared for AARP By: Optimal Benefit Strategies, LLC Judy Xanthopoulos, PhD Mary M. Schmitt, Esq.

More information

COST OF TAX CUT WOULD MORE THAN DOUBLE TO $5 TRILLION IN SECOND TEN YEARS. Tax Cut Would Worsen Deteriorating Long-Term Budget Forecast

COST OF TAX CUT WOULD MORE THAN DOUBLE TO $5 TRILLION IN SECOND TEN YEARS. Tax Cut Would Worsen Deteriorating Long-Term Budget Forecast 820 First Street, NE, Suite 510, Washington, DC 20002 Tel: 202-408-1080 Fax: 202-408-1056 center@cbpp.org http://www.cbpp.org Revised April 4, 2001 COST OF TAX CUT WOULD MORE THAN DOUBLE TO $5 TRILLION

More information

Supplemental Unit 5: Fiscal Policy and Budget Deficits

Supplemental Unit 5: Fiscal Policy and Budget Deficits 1 Supplemental Unit 5: Fiscal Policy and Budget Deficits Fiscal and monetary policies are the two major tools available to policy makers to alter total demand, output, and employment. This feature will

More information

The Economists Voice

The Economists Voice The Economists Voice Volume 2, Issue 1 2005 Article 8 A Special Issue on Social Security Saving Social Security: The Diamond-Orszag Plan Peter A. Diamond Peter R. Orszag Summary Social Security is one

More information

The Case for a Tax Cut

The Case for a Tax Cut The Case for a Tax Cut Alan C. Stockman University of Rochester, and NBER Shadow Open Market Committee April 29-30, 2001 1. Tax Increases Have Created the Surplus Any discussion of tax policy should begin

More information

The GPO predominantly penalizes women educators in California, while the WEP penalizes many individuals who switch careers into public service.

The GPO predominantly penalizes women educators in California, while the WEP penalizes many individuals who switch careers into public service. Chair Pomeroy and Members, Social Security has met the social insurance promise to ensure workers will not have to live in old age poverty. This promise needs to be guaranteed for current and future workers.

More information

Politics, Surpluses, Deficits, and Debt

Politics, Surpluses, Deficits, and Debt Defining Surpluses and Debt Politics, Surpluses,, and Debt Chapter 11 A surplus is an excess of revenues over payments. A deficit is a shortfall of revenues relative to payments. 2 Introduction After having

More information

EXTENDING EXPIRING TAX CUTS AND AMT RELIEF WOULD COST $3.3 TRILLION THROUGH 2016 By Joel Friedman and Aviva Aron-Dine

EXTENDING EXPIRING TAX CUTS AND AMT RELIEF WOULD COST $3.3 TRILLION THROUGH 2016 By Joel Friedman and Aviva Aron-Dine 820 First Street NE, Suite 510 Washington, DC 20002 Tel: 202-408-1080 Fax: 202-408-1056 center@cbpp.org www.cbpp.org Revised March 15, 2006 EXTENDING EXPIRING TAX CUTS AND AMT RELIEF WOULD COST $3.3 TRILLION

More information

LIFE EXPECTANCY AND SOCIAL SECURITY: WHY LONGEVITY INDEXING THE PAYROLL TAX RATE MAKES GOOD ECONOMIC SENSE. Abstract

LIFE EXPECTANCY AND SOCIAL SECURITY: WHY LONGEVITY INDEXING THE PAYROLL TAX RATE MAKES GOOD ECONOMIC SENSE. Abstract LIFE EXPECTANCY AND SOCIAL SECURITY: WHY LONGEVITY INDEXING THE PAYROLL TAX RATE MAKES GOOD ECONOMIC SENSE Abstract This paper examines the economic case for indexing the payroll tax to longevity. Over

More information

The Solutions Initiative II

The Solutions Initiative II The Heritage Foundation Saving the American Dream: The Heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity Alison Acosta Fraser, William W. Beach, and Stuart M. Butler, Ph.D. INTRODUCTION

More information

Five Flaws of the Current Pension System

Five Flaws of the Current Pension System The Administration s Savings Accounts Proposals: A Critique Peter Orszag and Gene Sperling November 13, 2003 Five Flaws of the Current Pension System 1. Few People Participate in the Current System Limited

More information

Federal Budget in Pictures CUT SPENDING // FIX THE DEBT // REDUCE THE TAX BURDEN$

Federal Budget in Pictures CUT SPENDING // FIX THE DEBT // REDUCE THE TAX BURDEN$ 2015 Federal Budget in Pictures CUT SPENDING // FIX THE DEBT // REDUCE THE TAX BURDEN$ 2015 Federal Budget in Pictures CUT SPENDING // FIX THE DEBT // REDUCE THE TAX BURDEN Thomas A. Roe Institute for

More information

Details and Analysis of Senator Bernie Sanders s Tax Plan

Details and Analysis of Senator Bernie Sanders s Tax Plan FISCAL FACT Jan. 2016 No. 498 Details and Analysis of Senator Bernie Sanders s Tax Plan By Alan Cole and Scott Greenberg Economist Analyst Key Findings: Senator Sanders (I-VT) would enact a number of policies

More information

The Macroeconomic Situation and Monetary Policy in Russia. Ladies and Gentlemen,

The Macroeconomic Situation and Monetary Policy in Russia. Ladies and Gentlemen, The Money and Banking Conference Monetary Policy under Uncertainty Dr. Sergey Ignatiev Chairman of the Bank of Russia (The 4 th of June 2007, Central Bank of Argentina, Buenos Aires) The Macroeconomic

More information

11/6/2013. Chapter 16: Government Debt. The U.S. experience in recent years. The troubling long-term fiscal outlook

11/6/2013. Chapter 16: Government Debt. The U.S. experience in recent years. The troubling long-term fiscal outlook Chapter 1: Government Debt Indebtedness of the world s governments Country Gov Debt (% of GDP) Country Gov Debt (% of GDP) Japan 17 U.K. 9 Italy 11 Netherlands Greece 11 Norway Belgium 9 Sweden U.S.A.

More information

United States General Accounting Office. Testimony Before the Committee on Finance, United States Senate

United States General Accounting Office. Testimony Before the Committee on Finance, United States Senate GAO United States General Accounting Office Testimony Before the Committee on Finance, United States Senate For Release on Delivery Expected at 10:00 a.m. EST on Thursday March 8, 2001 ALTERNATIVE MINIMUM

More information

Note: This feature provides supplementary analysis for the material in Part 3 of Common Sense Economics.

Note: This feature provides supplementary analysis for the material in Part 3 of Common Sense Economics. 1 Module C: Fiscal Policy and Budget Deficits Note: This feature provides supplementary analysis for the material in Part 3 of Common Sense Economics. Fiscal and monetary policies are the two major tools

More information

PROJECTION OF THE FISCAL BALANCE AND PUBLIC DEBT (2012 2027) - SUMMARY

PROJECTION OF THE FISCAL BALANCE AND PUBLIC DEBT (2012 2027) - SUMMARY PROJECTION OF THE FISCAL BALANCE AND PUBLIC DEBT (2012 2027) - SUMMARY PUBLIC FINANCE REVIEW February 2013 SUMMARY Key messages The purpose of our analysis is to highlight the risks that fiscal policy

More information

EXTENDING THE PRESIDENT S TAX CUTS AND AMT RELIEF WOULD COST $4.4 TRILLION THROUGH 2018 By Aviva Aron-Dine

EXTENDING THE PRESIDENT S TAX CUTS AND AMT RELIEF WOULD COST $4.4 TRILLION THROUGH 2018 By Aviva Aron-Dine 820 First Street NE, Suite 510 Washington, DC 20002 Tel: 202-408-1080 Fax: 202-408-1056 center@cbpp.org www.cbpp.org Revised March 28, 2008 EXTENDING THE PRESIDENT S TAX CUTS AND AMT RELIEF WOULD COST

More information

MACROECONOMIC ANALYSIS OF VARIOUS PROPOSALS TO PROVIDE $500 BILLION IN TAX RELIEF

MACROECONOMIC ANALYSIS OF VARIOUS PROPOSALS TO PROVIDE $500 BILLION IN TAX RELIEF MACROECONOMIC ANALYSIS OF VARIOUS PROPOSALS TO PROVIDE $500 BILLION IN TAX RELIEF Prepared by the Staff of the JOINT COMMITTEE ON TAXATION March 1, 2005 JCX-4-05 CONTENTS INTRODUCTION... 1 EXECUTIVE SUMMARY...

More information

FISCAL BALANCE AND PUBLIC DEBT. Outline: Chapter 12 FISCAL BALANCE AND PUBLIC DEBT. 5. Burden of the Debt

FISCAL BALANCE AND PUBLIC DEBT. Outline: Chapter 12 FISCAL BALANCE AND PUBLIC DEBT. 5. Burden of the Debt 02/10/2015 C h a p t e r 12 FISCAL BALANCE AND PUBLIC DEBT Public Finance, 10 th Edition David N. Hyman Adapted by Chairat Aemkulwat for Public Economics 2952331 Chairat Aemkulwat, Public Economics 2952331

More information

Adjusting to a Changing Economic World. Good afternoon, ladies and gentlemen. It s a pleasure to be with you here in Montréal today.

Adjusting to a Changing Economic World. Good afternoon, ladies and gentlemen. It s a pleasure to be with you here in Montréal today. Remarks by David Dodge Governor of the Bank of Canada to the Board of Trade of Metropolitan Montreal Montréal, Quebec 11 February 2004 Adjusting to a Changing Economic World Good afternoon, ladies and

More information

Debt, Deficits, and the Economy. John J. Seater

Debt, Deficits, and the Economy. John J. Seater Debt, Deficits, and the Economy John J. Seater When conversation turns to the economy, one of the most popular topics of discussion is the government deficit. Newspaper columnists, TV pundits, and of course

More information

Weekly Economic Commentary

Weekly Economic Commentary Weekly Economic Commentary March 21, 2015 by Carl Tannenbaum of Northern Trust What Is Full Employment, and Are We There Yet? March 20, 2015 One of my favorite jokes is the one about an economics graduate

More information

Cato Institute Policy Analysis No. 73: Deductible IRAs Are Best for Workers

Cato Institute Policy Analysis No. 73: Deductible IRAs Are Best for Workers Cato Institute Policy Analysis No. 73: Deductible IRAs Are Best for Workers June 3, 1986 Peter J. Ferrara Peter J. Ferrara, a Washington attorney, is author of Social Security: The Inherent Contradiction

More information

EXPANDING IRA BENEFITS

EXPANDING IRA BENEFITS EXPANDING IRA BENEFITS A JOINT ECONOMIC COMMITTEE STUDY Jim Saxton (R-NJ), Chairman Joint Economic Committee United States Congress December 1997 $EVWUDFW Providing new saving incentives to raise the U.S.

More information

Recent U.S. Economic Growth In Charts MAY 2012

Recent U.S. Economic Growth In Charts MAY 2012 Recent U.S. Economic Growth In Charts MAY 212 GROWTH SINCE 29 The Growth Story Since 29 Despite the worst financial crisis since the Great Depression and a series of shocks in its aftermath, the economy

More information

Commentary: What Do Budget Deficits Do?

Commentary: What Do Budget Deficits Do? Commentary: What Do Budget Deficits Do? Allan H. Meltzer The title of Ball and Mankiw s paper asks: What Do Budget Deficits Do? One answer to that question is a restatement on the pure theory of debt-financed

More information

Research. What Impact Will Ballooning Government Debt Levels Have on Government Bond Yields?

Research. What Impact Will Ballooning Government Debt Levels Have on Government Bond Yields? Research What Impact Will Ballooning Government Debt Levels Have on Government Bond Yields? The global economy appears to be on the road to recovery and the risk of a double dip recession is receding.

More information

Addressing Fiscal Sustainability and Fixing the Social Security System:

Addressing Fiscal Sustainability and Fixing the Social Security System: Addressing Fiscal Sustainability and Fixing the Social Security System: Two Challenges Facing the Nation The Honorable David M. Walker Comptroller General of the United States AARP Board of Directors Annual

More information

THE POTENTIAL MACROECONOMIC EFFECT OF DEBT CEILING BRINKMANSHIP

THE POTENTIAL MACROECONOMIC EFFECT OF DEBT CEILING BRINKMANSHIP OCTOBER 2013 THE POTENTIAL MACROECONOMIC EFFECT OF DEBT CEILING BRINKMANSHIP Introduction The United States has never defaulted on its obligations, and the U. S. dollar and Treasury securities are at the

More information

Why a Floating Exchange Rate Regime Makes Sense for Canada

Why a Floating Exchange Rate Regime Makes Sense for Canada Remarks by Gordon Thiessen Governor of the Bank of Canada to the Chambre de commerce du Montréal métropolitain Montreal, Quebec 4 December 2000 Why a Floating Exchange Rate Regime Makes Sense for Canada

More information

Details and Analysis of Dr. Ben Carson s Tax Plan

Details and Analysis of Dr. Ben Carson s Tax Plan FISCAL FACT Jan. 2016 No. 493 Details and Analysis of Dr. Ben Carson s Tax Plan By Kyle Pomerleau Director of Federal Projects Key Findings Dr. Ben Carson s tax plan would replace the federal income tax

More information

Average Federal Income Tax Rates for Median-Income Four-Person Families

Average Federal Income Tax Rates for Median-Income Four-Person Families 820 First Street, NE, Suite 510, Washington, DC 20002 Tel: 202-408-1080 Fax: 202-408-1056 center@cbpp.org http://www.cbpp.org April 10, 2002 OVERALL FEDERAL TAX BURDEN ON MOST FAMILIES INCLUDING MIDDLE-

More information

History. Discussion of Proposals

History. Discussion of Proposals Introduction It is accepted by both parties that the Social Security (SS) trust funds will be exhausted by 2036. Based on the 2010 Trustees report the National Commission on Fiscal Responsibility and Reform

More information

Composition of Federal Spending

Composition of Federal Spending The Honorable David M. Walker Comptroller General of the United States U.S. Government Accountability Office February 10, 2005 2 Composition of Federal Spending 1964 1984 2004* Defense Net interest *Current

More information

chapter: Solution Fiscal Policy

chapter: Solution Fiscal Policy Fiscal Policy chapter: 28 13 ECONOMICS MACROECONOMICS 1. The accompanying diagram shows the current macroeconomic situation for the economy of Albernia. You have been hired as an economic consultant to

More information

Policy Focus. The Need for Social Security Reform. Republicans and Democrats increasingly acknowledge that reforming. what you need to know

Policy Focus. The Need for Social Security Reform. Republicans and Democrats increasingly acknowledge that reforming. what you need to know Policy Focus The Need for Social Security Reform Recipes for Rational Government from the Independent Women s Forum Carrie Lukas, Managing Director, Independent Women s Forum August 2011 Volume 1, Number

More information

An Analysis of Eliminating the Cap on Earnings Subject to the Social Security Tax & Related Issues

An Analysis of Eliminating the Cap on Earnings Subject to the Social Security Tax & Related Issues Citizens for Tax Justice! 202-299-1066! www.ctj.org November 30, 2006 (6 pp.) An Analysis of Eliminating the Cap on Earnings Subject to the Social Security Tax & Related Issues Recently, there has been

More information

Executive Summary. 204 N. First St., Suite C PO Box 7 Silverton, OR 97381 www.ocpp.org 503-873-1201 fax 503-873-1947

Executive Summary. 204 N. First St., Suite C PO Box 7 Silverton, OR 97381 www.ocpp.org 503-873-1201 fax 503-873-1947 Executive Summary 204 N. First St., Suite C PO Box 7 Silverton, OR 97381 www.ocpp.org 503-873-1201 fax 503-873-1947 On Whose Backs? Tax Distribution, Income Inequality, and Plans for Raising Revenue By

More information

GAO FEDERAL DEBT. Debt Management in a Period of Budget Surplus. Testimony Before the Committee on Ways and Means, House of Representatives

GAO FEDERAL DEBT. Debt Management in a Period of Budget Surplus. Testimony Before the Committee on Ways and Means, House of Representatives GAO United States General Accounting Office Testimony Before the Committee on Ways and Means, House of Representatives For Release on Delivery Expected at 10 a.m. Wednesday, September 29, 1999 FEDERAL

More information

INSIGHT on the Issues

INSIGHT on the Issues INSIGHT on the Issues The Saver s Credit: What Does It Do For Saving? AARP Public Policy Institute The saver s credit is one of very few tax incentives to promote savings that targets lowand middle-income

More information

a Responsible and Credible Plan for Deficit Reduction; and an Improved Tax System

a Responsible and Credible Plan for Deficit Reduction; and an Improved Tax System Administration's Fiscal Year 2012 Budget Provides Incentives for Innovation, Infrastructure, and Education; Middle-Class Tax Relief; a Responsible and Credible Plan for Deficit Reduction; and an Improved

More information

Macroeconomics Instructor Miller Fiscal Policy Practice Problems

Macroeconomics Instructor Miller Fiscal Policy Practice Problems Macroeconomics Instructor Miller Fiscal Policy Practice Problems 1. Fiscal policy refers to changes in A) state and local taxes and purchases that are intended to achieve macroeconomic policy objectives.

More information

An IRA can put you in control of your retirement, whether you

An IRA can put you in control of your retirement, whether you IRAs: Powering Your Retirement One of the most effective ways to build and manage funds to help you meet your financial goals is through an Individual Retirement Account (IRA). An IRA can put you in control

More information

THE ESTATE TAX: MYTHS AND REALITIES

THE ESTATE TAX: MYTHS AND REALITIES 820 First Street NE, Suite 510 Washington, DC 20002 Tel: 202-408-1080 Fax: 202-408-1056 center@cbpp.org www.cbpp.org Revised October 11, 2007 THE ESTATE TAX: MYTHS AND REALITIES The estate tax has been

More information

The Role of Tax Reform in Comprehensive Deficit Reduction and Fiscal Policy. Martin Feldstein

The Role of Tax Reform in Comprehensive Deficit Reduction and Fiscal Policy. Martin Feldstein For Release on Delivery September 13, 2011 at 2 p.m. The Role of Tax Reform in Comprehensive Deficit Reduction and Fiscal Policy Martin Feldstein Thank you, Mr. Chairman. I am very pleased to have this

More information

/ # GALE % CENGAGE Learning- Detroit New York San Francisco New Haven, Conn Waterville, Maine London

/ # GALE % CENGAGE Learning- Detroit New York San Francisco New Haven, Conn Waterville, Maine London CONTROVERSIES I Social Security Debra A. Miller, Book Editor GREENHAVEN PRESS A part of Gale, Cengage Learning / # GALE % CENGAGE Learning- Detroit New York San Francisco New Haven, Conn Waterville, Maine

More information

Municipal Credit Conditions and The Efficiency of Tax-Exemption. California Debt and Investment Advisory Commission PRESENTATION FOR: January 11, 2012

Municipal Credit Conditions and The Efficiency of Tax-Exemption. California Debt and Investment Advisory Commission PRESENTATION FOR: January 11, 2012 Municipal Credit Conditions and The Efficiency of Tax-Exemption PRESENTATION FOR: California Debt and Investment Advisory Commission PRESENTED BY: Cadmus Hicks, CFA, PhD Managing Director 312-917-7865

More information

Canada s Retirement Security Crisis. National Union of Public and General Employees (NUPGE) Ottawa, Canada: January 2012

Canada s Retirement Security Crisis. National Union of Public and General Employees (NUPGE) Ottawa, Canada: January 2012 Canada s Retirement Security Crisis National Union of Public and General Employees (NUPGE) Ottawa, Canada: January 2012 MYTH1 Most public sector employees have a gold-plated pension. No, in fact the far

More information

AN EXCISE TAX ON INSURERS OFFERING HIGH-COST PLANS CAN HELP PAY FOR HEALTH REFORM Would Also Help Slow Growth in Health Costs by Paul N.

AN EXCISE TAX ON INSURERS OFFERING HIGH-COST PLANS CAN HELP PAY FOR HEALTH REFORM Would Also Help Slow Growth in Health Costs by Paul N. 820 First Street NE, Suite 510 Washington, DC 20002 Tel: 202-408-1080 Fax: 202-408-1056 center@cbpp.org www.cbpp.org August 7, 2009 AN EXCISE TAX ON INSURERS OFFERING HIGH-COST PLANS CAN HELP PAY FOR HEALTH

More information

MACROECONOMIC AND INDUSTRY ANALYSIS VALUATION PROCESS

MACROECONOMIC AND INDUSTRY ANALYSIS VALUATION PROCESS MACROECONOMIC AND INDUSTRY ANALYSIS VALUATION PROCESS BUSINESS ANALYSIS INTRODUCTION To determine a proper price for a firm s stock, security analyst must forecast the dividend & earnings that can be expected

More information

Lecture 4: The Aftermath of the Crisis

Lecture 4: The Aftermath of the Crisis Lecture 4: The Aftermath of the Crisis 2 The Fed s Efforts to Restore Financial Stability A financial panic in fall 2008 threatened the stability of the global financial system. In its lender-of-last-resort

More information

The Long-Term Budgetary Impact of Paths for Federal Revenues and Spending Specified by Chairman Ryan

The Long-Term Budgetary Impact of Paths for Federal Revenues and Spending Specified by Chairman Ryan MARCH 2012 The Long-Term Budgetary Impact of Paths for Federal Revenues and Spending Specified by Chairman Ryan At the request of the Chairman of the House Budget Committee, Congressman Paul Ryan, the

More information

Simplify and Focus the Education Tax Incentives. June, 2006

Simplify and Focus the Education Tax Incentives. June, 2006 Simplify and Focus the Education Tax Incentives June, 2006 Susan Dynarski, Harvard University & National Bureau of Economic Research Judith Scott Clayton, Harvard University A college education is a good

More information

National Committee to Preserve Social Security and Medicare. Social Security Reform. Presented to: Commission to Save Social Security.

National Committee to Preserve Social Security and Medicare. Social Security Reform. Presented to: Commission to Save Social Security. National Committee to Preserve Social Security and Medicare Presented to: Commission to Save Social Security Regarding Social Security Reform September 6, 2001 The Social Security system contributes to

More information

Debt and Deficits. David Rosen

Debt and Deficits. David Rosen Debt and Deficits David Rosen Grade Levels: 9,10,11,12 Document Type: Supplementary Materials Description: Examines the national debt and deficits, looks at their size and impact, and discusses various

More information

The Solution is the Problem

The Solution is the Problem 11 LP May/June 2009 Special Issue The Solution is the Problem MARKETS AT A GLANCE Eric Sprott David Franklin The US government raised $705 billion worth of new debt in 2008. The debt was raised to pay

More information

! At least 3.1 million women raising children as a single parent, or 36% of all single mothers, will receive no tax benefit from the Bush plan.

! At least 3.1 million women raising children as a single parent, or 36% of all single mothers, will receive no tax benefit from the Bush plan. March 5, 2001 Women and Children Last: The Bush Tax Cut Plan The President has proposed a tax cut plan that fails to offer any benefits to the lowestincome families, most of whom are headed by women and

More information

Florida s Intangibles Tax: The Case for Repeal

Florida s Intangibles Tax: The Case for Repeal Florida s Intangibles Tax: The Case for Repeal by Randall G. Holcombe DeVoe Moore Professor of Economics, Florida State University and Chairman, Research Advisory Board The James Madison Institute Policy

More information

Tax Expenditures and Social Policy: A Primer

Tax Expenditures and Social Policy: A Primer Percent Tax Expenditures and Social Policy: A Primer Daniel Mandel What Are Tax Expenditures? Congress uses the tax code to promote a broad range of policy objectives. Rather than directly spend government

More information

Chapter 4 Consumption, Saving, and Investment

Chapter 4 Consumption, Saving, and Investment Chapter 4 Consumption, Saving, and Investment Multiple Choice Questions 1. Desired national saving equals (a) Y C d G. (b) C d + I d + G. (c) I d + G. (d) Y I d G. 2. With no inflation and a nominal interest

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Suvey of Macroeconomics, MBA 641 Fall 2006, Final Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Modern macroeconomics emerged from

More information

Policy Brief June 2010

Policy Brief June 2010 Policy Brief June 2010 Pension Tension: Understanding Arizona s Public Employee Retirement Plans The Arizona Chamber Foundation (501(c)3) is a non-partisan, objective educational and research foundation.

More information

Chapter 4. Consumption, Saving, and Investment. 2008 Pearson Addison-Wesley. All rights reserved

Chapter 4. Consumption, Saving, and Investment. 2008 Pearson Addison-Wesley. All rights reserved Chapter 4 Consumption, Saving, and Investment Chapter Outline Consumption and Saving Investment Goods Market Equilibrium 4-2 Consumption and Saving The importance of consumption and saving Desired consumption:

More information

In recent years, fiscal policy in China has been prudent. Fiscal deficits

In recent years, fiscal policy in China has been prudent. Fiscal deficits 1 Fiscal Policy in China STEVEN DUNAWAY AND ANNALISA FEDELINO* In recent years, fiscal policy in China has been prudent. Fiscal deficits have been lower than budgeted, because revenue overperformances

More information

Higher Education Tax Benefits: Brief Overview and Budgetary Effects

Higher Education Tax Benefits: Brief Overview and Budgetary Effects Higher Education Tax Benefits: Brief Overview and Budgetary Effects Margot L. Crandall-Hollick Analyst in Public Finance Mark P. Keightley Analyst in Public Finance August 24, 2011 CRS Report for Congress

More information

Pennsylvania Intergovernmental Cooperation Authority

Pennsylvania Intergovernmental Cooperation Authority Pennsylvania Intergovernmental Cooperation Authority Philadelphia Must Reduce Its Need for Tax Revenues White Paper (No. 7) January 31, 2000 PENNSYLVANIA INTERGOVERNMENTAL COOPERATION AUTHORITY 1429 Walnut

More information

Project LINK Meeting New York, 20-22 October 2010. Country Report: Australia

Project LINK Meeting New York, 20-22 October 2010. Country Report: Australia Project LINK Meeting New York, - October 1 Country Report: Australia Prepared by Peter Brain: National Institute of Economic and Industry Research, and Duncan Ironmonger: Department of Economics, University

More information

Facts and Figures on the Middle-Class Squeeze in Idaho

Facts and Figures on the Middle-Class Squeeze in Idaho Facts and Figures on the Middle-Class Squeeze in Idaho For hard-working, middle-class families all over the country, life during the Bush presidency has grown less affordable and less secure. President

More information

Government Budget and Fiscal Policy CHAPTER

Government Budget and Fiscal Policy CHAPTER Government Budget and Fiscal Policy 11 CHAPTER The National Budget The national budget is the annual statement of the government s expenditures and tax revenues. Fiscal policy is the use of the federal

More information

SOCIAL SECURITY REFORM: work incentives ISSUE BRIEF NO. 6. Issue Brief No. 6. work incentives

SOCIAL SECURITY REFORM: work incentives ISSUE BRIEF NO. 6. Issue Brief No. 6. work incentives Introduction Issue Brief No. 6 Social Security Reform: work incentives This sixth and final Treasury issue brief on Social Security reform discusses Social Security s effect on work incentives and the

More information

GAO PATIENT PROTECTION AND AFFORDABLE CARE ACT. Effect on Long-Term Federal Budget Outlook Largely Depends on Whether Cost Containment Sustained

GAO PATIENT PROTECTION AND AFFORDABLE CARE ACT. Effect on Long-Term Federal Budget Outlook Largely Depends on Whether Cost Containment Sustained GAO United States Government Accountability Office Report to the Ranking Member, Committee on the Budget, U.S. Senate January 2013 PATIENT PROTECTION AND AFFORDABLE CARE ACT Effect on Long-Term Federal

More information

States Can Adopt or Expand Earned Income Tax Credits to Build a Stronger Future Economy By Erica Williams

States Can Adopt or Expand Earned Income Tax Credits to Build a Stronger Future Economy By Erica Williams Updated January 19, 2016 States Can Adopt or Expand Earned Income Tax Credits to Build a Stronger Future Economy By Erica Williams Twenty-six states plus the District of Columbia have enacted their own

More information

Tax Relief in the American Recovery and Reinvestment Act of 2009

Tax Relief in the American Recovery and Reinvestment Act of 2009 Legislation and Policy Brief Volume 1 Issue 2 Spring 2009 - An Economy in Crisis: What Can Be Done? Article 2 9-24-2010 Tax Relief in the American Recovery and Reinvestment Act of 2009 Steven Gassert sg2702a@student.american.edu

More information

The Congress, the President, and the Budget: The Politics of Taxing and Spending

The Congress, the President, and the Budget: The Politics of Taxing and Spending Edwards, Wattenberg, and Lineberry Government in America: People, Politics, and Policy Thirteenth Edition Chapter 14 The Congress, the President, and the Budget: The Politics of Taxing and Spending Introduction!

More information

Many Banks and Thrifts Overly Reliant on Hot Money Deposits:

Many Banks and Thrifts Overly Reliant on Hot Money Deposits: Many Banks and Thrifts Overly Reliant on Hot Money Deposits: Why an FDIC Coverage Increase to $250,000 May Not Stop Bank Runs and Could Cause Other Collateral Damage Submitted by Martin D. Weiss, Ph.D.

More information

Medicare Economics. Part A (Hospital Insurance) Funding

Medicare Economics. Part A (Hospital Insurance) Funding Medicare Economics Medicare expenditures are a substantial part of the federal budget $556 billion, or 15 percent in 2012. They also comprise 3.7 percent of the country s gross domestic product (GDP),

More information

INCOME TAX REFORM. What Does It Mean for Taxpayers?

INCOME TAX REFORM. What Does It Mean for Taxpayers? BRIEFING PAPER INCOME TAX REFORM What Does It Mean for Taxpayers? Office of Legislative Research and General Counsel DECEMBER 2006 UTAH LEGISLATURE HIGHLIGHTS SB 4001, passed in the 2006 4th Special Session,

More information

Tax Subsidies for Health Insurance An Issue Brief

Tax Subsidies for Health Insurance An Issue Brief Tax Subsidies for Health Insurance An Issue Brief Prepared by the Kaiser Family Foundation July 2008 Tax Subsidies for Health Insurance Most workers pay both federal and state taxes for wages paid to them

More information

April 8,2005 JEFFREY KUPFER, EXECUTIVE DIRECTOR PRESIDENT S ADVISORY PANEL ON FEDERAL TAX REFORM

April 8,2005 JEFFREY KUPFER, EXECUTIVE DIRECTOR PRESIDENT S ADVISORY PANEL ON FEDERAL TAX REFORM DEPARTMENT OF THE TREASURY WASHINGTON, D.C. 20220 April 8,2005 MEMORANDUM FOR FROM SUBJECT JEFFREY KUPFER, EXECUTIVE DIRECTOR PRESIDENT S ADVISORY PANEL ON FEDERAL TAX REFORM ROBERT CAmoLi& DEPUTY ASSISTANT

More information

CONGRESS OF THE UNITED STATES CONGRESSIONAL BUDGET OFFICE CBO. The Distribution of Household Income and Federal Taxes, 2008 and 2009

CONGRESS OF THE UNITED STATES CONGRESSIONAL BUDGET OFFICE CBO. The Distribution of Household Income and Federal Taxes, 2008 and 2009 CONGRESS OF THE UNITED STATES CONGRESSIONAL BUDGET OFFICE Percent 70 The Distribution of Household Income and Federal Taxes, 2008 and 2009 60 50 Before-Tax Income Federal Taxes Top 1 Percent 40 30 20 81st

More information

Chapter 18. MODERN PRINCIPLES OF ECONOMICS Third Edition

Chapter 18. MODERN PRINCIPLES OF ECONOMICS Third Edition Chapter 18 MODERN PRINCIPLES OF ECONOMICS Third Edition Fiscal Policy Outline Fiscal Policy: The Best Case The Limits to Fiscal Policy When Fiscal Policy Might Make Matters Worse So When Is Fiscal Policy

More information

The U.S. debt has surpassed 100 percent of gross domestic product (GDP). This debt

The U.S. debt has surpassed 100 percent of gross domestic product (GDP). This debt The U.S. Deficit/Debt Problem: A Longer-Run Perspective Daniel L. Thornton The U.S. national debt now exceeds 1 percent of gross domestic product. Given that a significant amount of this debt is the result

More information

Government Budgets. STRATEGIC FORESIGHT INITIATIVE Getting Urgent About the Future

Government Budgets. STRATEGIC FORESIGHT INITIATIVE Getting Urgent About the Future Government Budgets Long-term Trends and Drivers and Their Implications for Emergency Management May 2011 Overview Government budgets are currently experiencing significant constraints. Although there is

More information

FISCAL POLICY* Chapter. Key Concepts

FISCAL POLICY* Chapter. Key Concepts Chapter 15 FISCAL POLICY* Key Concepts The Federal Budget The federal budget is an annual statement of the government s expenditures and tax revenues. Using the federal budget to achieve macroeconomic

More information

Principles and key features of required reform

Principles and key features of required reform 3 Principles and key features of required reform Given the realities outlined in Chapters 1 and 2 the Pensions Commission believes that minor changes in policy, tinkering with the present system, will

More information

Three Ways to Consolidate the Fiscal

Three Ways to Consolidate the Fiscal Three Ways to Consolidate the Fiscal Situation Jun Saito, Senior Research Fellow Japan Center for Economic Research February 2, 2015 Medium-term fiscal consolidation measures to be announced In exchange

More information

THE DEBT TAX A drain on our pocketbooks and the economy

THE DEBT TAX A drain on our pocketbooks and the economy THE DEBT TAX A drain on our pocketbooks and the economy Talking points What is the 'Debt Tax'? The United States federal government paid $332.5 billion in interest last year on the national debt. 1 This

More information

FISCAL POLICY* Chapter. Key Concepts

FISCAL POLICY* Chapter. Key Concepts Chapter 11 FISCAL POLICY* Key Concepts The Federal Budget The federal budget is an annual statement of the government s expenditures and tax revenues. Using the federal budget to achieve macroeconomic

More information

CHAPTER 6 DEFINED BENEFIT AND DEFINED CONTRIBUTION PLANS: UNDERSTANDING THE DIFFERENCES

CHAPTER 6 DEFINED BENEFIT AND DEFINED CONTRIBUTION PLANS: UNDERSTANDING THE DIFFERENCES CHAPTER 6 DEFINED BENEFIT AND DEFINED CONTRIBUTION PLANS: UNDERSTANDING THE DIFFERENCES Introduction Both defined benefit and defined contribution pension plans offer various advantages to employers and

More information

Economics. Social Studies Curriculum Framework. Revised 2006 Amended June 2009

Economics. Social Studies Curriculum Framework. Revised 2006 Amended June 2009 Economics Social Studies Curriculum Framework Revised 2006 Course Title: Economics Course/Unit Credit: 0.5 Course Number: 4743000 Teacher Licensure: Please refer to the Course Code Management System (https://adedata.arkansas.gov/ccms/)

More information

Executive Summary. Model Structure. General Economic Environment and Assumptions

Executive Summary. Model Structure. General Economic Environment and Assumptions Executive Summary The (LTFP) report is an update from the preliminary report presented in January 2009 and reflects the Mayor s Proposed Budget for Fiscal Year 2010 and Fiscal Year 2011. Details of the

More information

After a severe slowdown in the early 1990s, General Fund

After a severe slowdown in the early 1990s, General Fund Forecasting Revenue Receipts in the States Forecasting Revenue Receipts in the States: Current Challenges in California Abstract - General Fund revenue growth in California has been quite strong in recent

More information

Looking for Tax Revenue in All the Wrong Places: 401(k) Plans Under Attack

Looking for Tax Revenue in All the Wrong Places: 401(k) Plans Under Attack VOL. 25, NO. 1 SPRING 2012 BENEFITS LAW JOURNAL From the Editor Looking for Tax Revenue in All the Wrong Places: 401(k) Plans Under Attack If we could help restore our nation s fiscal health by reducing

More information

Statement by Dean Baker, Co-Director of the Center for Economic and Policy Research (www.cepr.net)

Statement by Dean Baker, Co-Director of the Center for Economic and Policy Research (www.cepr.net) Statement by Dean Baker, Co-Director of the Center for Economic and Policy Research (www.cepr.net) Before the U.S.-China Economic and Security Review Commission, hearing on China and the Future of Globalization.

More information

Section 2 Evaluation of current account balance fluctuations

Section 2 Evaluation of current account balance fluctuations Section 2 Evaluation of current account balance fluctuations Key points 1. The Japanese economy and IS balance trends From a macroeconomic perspective, the current account balance weighs the Japanese economy

More information

3 Macroeconomics LESSON 8

3 Macroeconomics LESSON 8 3 Macroeconomics LESSON 8 Fiscal Policy Introduction and Description Fiscal policy is one of the two demand management policies available to policy makers. Government expenditures and the level and type

More information