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Economic News, Data and Analysis

CBO deficit numbers

The CBO has released their analysis of the president’s budget. They find that the presiden’t proposals would add $737 billion to the deficit over ten years.

Letter to the Honorable Ted Stevens regarding the preliminary results of CBO’s analysis of the President’s budgetary proposals for fiscal year 2005
Under the President’s budget, CBO estimates, the deficit would be $478 billion in fiscal year 2004 and $356 billion in 2005 (see Table 1). As a share of the economy, the deficit would total 4.2 percent of gross domestic product (GDP) this year, then fall to 2.9 percent next year. Under the President’s policies, the deficit would decline further–to 2.1 percent of GDP–in 2006 and then remain between 1.6 percent and 1.8 percent through 2014.
Over the 10-year period from 2005 through 2014, deficits would total $2.75 trillion under the President’s policies–$737 billion higher than CBO’s baseline projection of the cumulative deficit.(1) Debt held by the public would rise from 36 percent of GDP at the end of 2003 to about 40 percent during the years 2006 through 2014.

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Filed under: Economics

Dead Computer

It appears my computer has finally died. The hard drive has completely bitten the dust and I can’t even seem to reformat – which I’ve had to do a couple times recently. The printer port has been on the fritz for years, and it’s been generally disagreable for the past several months.
So, it looks like a good excuse to get a new computer. So I am turning to you, my faithful readers, to help me out. ArgMax has provided a free news service, data alerts, and this weblog for almost 2 years. Please consider chipping in to get me an upgrade.
I figure a new Dell, not the bottom, but nothing fancy, will run me about $750 – say 30 people at $25?

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Note: The “donations” are not tax deductible – while I am not making a profit off this site, ArgMax is not a registered nonprofit. I do, however, work for a nonprofit organization, for what it’s worth.

Filed under: Website

Upper-Income Tax Cuts and Jobs

From: OMB Watch – Federal Budget – Weblog
President Bush is arguing that reducing the top marginal rate would “fuel” job growth.
The problem with using the top marginal tax rate as a tool to cut taxes on “small” businesses is that 1) it misses most small businesses – less than 4% of businesses make enough to be taxed at the top individual rate, and 2) it reduces taxes on upper income individuals regardless of the source income – thus it does not target businesses efficiently.
Cutting the top marginal tax rate is not a credible way to spur job creation. It looks like the adminstration has again fallen into the same old pattern of proposing upper-income tax cuts as the cure for all ills.

Bush Assertion on Tax Cuts Is at Odds With IRS Data (washingtonpost.com)
President Bush defended his tax cuts yesterday as economic fuel for the small-business sector in response to mounting criticism from Democratic presidential candidates that the cuts chiefly benefited the wealthiest Americans.
But the president’s contention that upper-income tax cuts primarily benefit entrepreneurs conflicts with some of the government’s own data.
[…]
Internal Revenue Service statistics cited by a Democratic senator this month show that the vast majority of small businesses do not earn nearly enough money to fall into the highest income tax bracket. According to IRS data from the 2001 tax year, 3.8 percent of the 18.2 million business tax returns filed that year reported taxable income of $200,000 or more. The top tax bracket last year kicked in at $311,950 of taxable income.
In contrast, 62 percent of business filers reported incomes of less than $50,000, putting them at most in the 15 percent tax bracket, the second lowest. Nearly 88 percent of business filers reported income of less than $100,000, keeping them comfortably below the top two tax brackets of 33 percent and 35 percent, which Kerry and Edwards propose to raise.

Filed under: Economics

Budget and Economic Projections

OMB Watch – Economy and Jobs Watch: Another Administration Projection Bites the Dust
Yet another economic projection by the administration is falling short – and in record time. Just a couple weeks after the publication of the Economic Report of the President, which forecasted 3.8 million* new jobs would be created in 2004, administration officials appears to be backing off the job estimates. The forecast was for 320,000 new jobs every month – a number most observers agree is exceptionally high. Job growth has not reached even half this level in any month over the past three years, according to data from the Bureau of Labor Statistics.
Unfortunately, this is part of a pattern of forecasts from the administration that appear to be wildly inaccurate. While there is always a degree of uncertainty in any economic forecast, the size of the errors and revisions seems to be exceptionally large, and the direction of the errors always appear to be in the favor of the political goals of the administration.
[…]
Accuracy and honesty in economic and budget projections is a necessity when formulating policy. By backing away from estimates produced by the presidentís top economic advisors, the administration is turning budgetary and economic projections into a guessing game for those citizens concerned with the financial health of the country.
Full article…

Filed under: Economics

Forecasting the Economy

More on the administration’s forecasts:

White House Forecasts Often Miss The Mark (washingtonpost.com)
President Bush last week caused a stir when he declined to endorse a projection, made by his own Council of Economic Advisers, that the economy would add 2.6 million jobs this year. But that forecast, derided as wildly optimistic, was one of the more modest predictions the administration has made about the economy over the past three years.
Two years ago, the administration forecast that there would be 3.4 million more jobs in 2003 than there were in 2000. And it predicted a budget deficit for fiscal 2004 of $14 billion. The economy ended up losing 1.7 million jobs over that period, and the budget deficit for this year is on course to be $521 billion.
These are not isolated cases. Over three years, the administration has repeatedly and significantly overstated the government’s fiscal health and the number of jobs the economy would create, but economists and politicians disagree about why.
[…]
Bush has since said that his optimism about budget deficits was based on the assumption that the economy would not hit a “trifecta” of trouble: recession, national emergency and war. But in February 2002 — after the recession was declared, the terrorist attacks had occurred and war had begun in Afghanistan — the administration continued to have upbeat predictions. Although it forecast a $106 billion deficit in 2002, it saw the deficit shrinking to $80 billion in 2003, $14 billion in 2004, and becoming a surplus of $61 billion in 2005. Those figures, too, quickly became seen as overly optimistic, as tax receipts continued to come in lower than expected. A year later, in 2003, the administration predicted a deficit of $304 billion for 2003 and $307 billion for 2004. In reality, the 2003 deficit was $375 billion, and the White House now expects a deficit of $521 billion for 2004.

Filed under: Economics

Oops on Jobs data

I think we can credit Brad DeLong with doing some simple math to shed some light on the, shall we say, “over-optimistic” job projections from the CEA. (Here is DeLong’s first post on the CEA numbers, I think)

White House won’t back job forecast – Feb. 18, 2004
The White House on Wednesday declined to publicly endorse its forecast predicting the average level of new jobs this year would rise by 2.6 million, prompting criticism from Democrats.

Filed under: Economy

2005 Federal Budget Continues Fiscal Decline

OMB Watch has released a new report entitled “2005 Federal Budget Continues Fiscal Decline.”
The report finds that even if we take the numbers in the budget at face value, there is considerable fiscal decline in the federal budget, including:
* A deficit of $521 billion for 2004;
* Revenue at 15.7% of GDP – the lowest in over 50 years;
* Massive structural deficits totaling $1.3 trillion over the years 2005-2009;
* Long-term deficits over the next 50 years, tripling current deficits as a percentage of GDP; and
* Over the next 10 years, the president is proposing a net $1.1 trillion in revenue reductions – most of which (87%) will occur after the 2005-2009 window included in the budget.
The final section offers some of the implications of this recent fiscal decline.
See OMB Watch – 2005 Federal Budget Continues Fiscal Decline for full details.

Filed under: Economics

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