John Irons's Blog

Icon

Economic News, Data and Analysis

Criminal Media

As the president was giving his press conference last night, the Congress was passing their budget… and nobody asked the president about it?
“Mr. president, when more and more people are becoming uninsured and health care cost skyrocketing, how can you support congress cutting Medicaid spending by $10 billion? … You talk about helping the poor in your social security plan, why then do you support cutting food stamps? … At a time of greatly increasing tuition costs, how do you justify cutting back on funding for student loans? … At a time of massive deficits, how can you justify passing over $100 billion more in revenue cuts? … do you think it is fair to pass additional hundreds of billions of dollars of debt to future generations? … Is the $300 billion we’ve spent in Iraq causing us to short-change domestic priorities? … etc. etc. etc.
Anyone? Anyone?

Budget Deal Sets Stage for Arctic Drilling And Tax Cuts
Congress passed a five-year, $14 trillion budget last night that will pave the way for oil drilling in parts of an Alaskan wildlife refuge, a new round of tax cuts and the first curbs on entitlements for the poor in nearly a decade.
The House approved the plan by a vote of 214 to 211, and the Senate voted 52 to 47.
Under the hard-fought agreement, the federal deficit, which reached a record $412 billion in 2004, would fall to $383 billion in 2006 and $211 billion by 2010. Congress would be expected to shave $35 billion off the growth of entitlement programs through 2010, the first such savings since the 1997 balanced budget agreement.
Nearly a third of that total would come from Medicaid, the primary federal and state health program for the poor. At the same time, the budget makes room for $106 billion of tax cuts over five years, $70 billion of which would be protected from a Senate filibuster.


Assessing the Conference Agreement on the Budget Resolution

Summary
House and Senate Republican conferees have reached agreement on a Congressional budget resolution for fiscal year 2006. The conference agreement calls for significant cuts in domestic programs — both entitlement and annually appropriated (so-called discretionary) programs — over the next five years. But because the conference agreement also calls for substantial new tax cuts and increases in funding for defense and international programs, the budget resolution would increase deficits over the next five years by $168 billion, compared with the deficits the Congressional Budget Office estimates would occur if there were no changes in policies.
The conference agreement includes:
Tax cuts, featuring more cuts in taxes for high-income individuals. The budget agreement includes tax cuts totaling $106 billion over five years, with $70 billion to be achieved through the fast-track reconciliation process. These tax cuts are widely expected to include extension of the capital gains and dividend tax cuts, which primarily benefit people at high income levels.
Entitlement cuts, with a substantial share likely to come from low-income programs. The budget features cuts in entitlement and other mandatory programs totaling $30.5 billion over five years, with $34.7 billion of the cuts to be included in a reconciliation bill and $4.2 billion in entitlement increases that would occur outside of reconciliation. That bill would include significant reductions in low-income programs — $10 billion in reductions in Medicaid, plus cuts in the Food Stamp Program.
Domestic Discretionary Cuts. The cuts in funding for annually appropriated (discretionary) domestic programs — the part of the budget that includes education, veteran’s health care, environmental protection, housing, and many other program areas —total $212 billion over five years. (This amount refers to the level of cuts below the 2005 funding levels, adjusted for inflation.) This reduction in funding would reduce expenditures — or outlays — on domestic discretionary programs by $143 billion over five years.[1]
In 2006, funding for domestic discretionary programs would be reduced by $23 billion, or 5.9 percent, in real terms. The cut would grow to $59 billion, or 13.5 percent, in 2010. (Since most homeland security programs are included in the domestic category and the new budget assumes increases for those programs, other domestic programs would have to be cut by more than the amounts cited here.)
Defense and International Increases. Funding for defense and international discretionary programs would be increased by $186 billion over five years, with most of the increase going to defense. This additional funding (plus the 2005 supplemental appropriation for Iraq and Afghanistan that is now in conference) increase expenditures over the CBO baseline by $199 billion over five years.
Increased Deficits. Including the $36 billion increase in interest payments on the debt that would result from these policy changes, the deficit would be $168 billion higher than the level that CBO projects will occur if no changes in policy are made.
The conference agreement on the budget resolution is a clear demonstration of the priorities of the Congressional leadership, with significant tax cuts, especially for wealthy investors, coming at the expense both of domestic programs — many of which serve vulnerable, low-income people — and of increases in the deficit.
Effect of the Conference Budget Plan on Projected Deficits
Cumulative deficit increases (+) or reductions
(-) relative to CBO’s March baseline projection
over the five-year period 2006-2010, in billions of dollars Cost of tax cuts. +106.2
Reductions in entitlement benefits. -30.5
Expenditure reductions from $212 billion reduction in funding (i.e., appropriations) for domestic discretionary programs. -143.0
Expenditure increases for defense and international discretionary programs. +198.7
Increased interest costs resulting from above policies. +36.0
TOTAL increase in projected deficits. +167.5

Advertisements

Filed under: Economics

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Pages

Archives

%d bloggers like this: