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Economic News, Data and Analysis

Student Loan Cuts

Congress is set to take up a “reconciliaiton” budget bill that will include $15 billion (over 5 years) in cuts to student loans.

Committee Approves $15B In Cuts To Student Loan Programs
The House Education and the Workforce Committee approved cuts Wednesday of about $15 billion in mandatory spending from student loan programs, as part of its contribution to the budget reconciliation package.
The panel was charged with finding $18.1 billion in savings over the next five years. The measure cleared the committee on a 22-19 party-line vote.
[JSI, Republicans voted for the cuts]
Education and the Workforce Chairman Boehner disputed Democratic claims that the measure would hinder students’ access to college. He said most of the savings in the bill come from administrative costs and subsidies to lenders, not from students.
“The students do fine under this proposal,” Boehner said. “These lenders out there, they’re bleeding. There’s no question we went after them in a big way. Say reconciliation wasn’t an issue, would we have gone as far as we did in this package? Probably not.”
But Democrats argued that lenders would not absorb the hits, but would pass them along to student borrowers, making loans more expensive.
Education and the Workforce ranking member George Miller, D-Calif., lambasted the Republican leadership for keeping tax cuts in place while attempting to enact, “the largest cuts in the entire history of federal student financial aid programs … Student aid programs are not a slush fund for Congress to raid whenever it wants tax cuts for the wealthy,” he said.
GOP committee aides say the measure would reduce insurance rates given to lenders to help protect them from defaulted loans, and increase lender fees. It also aims to lower collection costs, encouraging lenders to be efficient in collecting on loans, GOP aides said.
The bill would impose a 1 percent origination fee on college graduates who chose to consolidate their loans.

Filed under: Economics

Mack On Taxes

Connie Mack, Retired GOP Senator doesn’t seem too worried about the deficit…

Taxing Issues – New York Times
Q: Well, the U.S. government has to get money from somewhere. As a two-term former Republican senator from Florida, where do you suggest we get money from?
A: What money?
Q: The money to run this country.
A: We’ll borrow it.
Q: I never understand where all this money comes from.
When the president says we need another $200 billion for Katrina repairs, does he just go and borrow it from the Saudis?
A: In a sense, we do. Maybe the Chinese.
Q: Is that fair to our children? If we keep borrowing at this level, won’t the Arabs or the Chinese eventually own this country?
A: I am not worried about that. We are a huge country producing enormous assets day in and day out. We have great strength, and we have always adjusted to difficulties that faced us, and we will continue to do so.

Filed under: Economics

More on the Tax Panel

President’s Tax Panel Proposes Broad Reforms – Center for American Progress
Considering the backward direction of the Bush administration’s tax policy over the last five years, the proposals from the president’s tax panel are something of a relief. The last five years of tax changes have led to declining revenues, massive deficits, and an increasingly unfair tax code. The panel’s recommendations are at least neutral on those major choices.
The president’s tax reform panel yesterday met for its last public meeting and made public specific outlines of what it will be proposing on November 1. While many of the details are still to be determined, the panel will recommend two distinct options: 1) a reform of the current income tax, and 2) a modified “progressive consumption tax.” Each policy, in different ways, shifts taxation away from capital and savings, and onto work and consumption. The second option that moves away from a pure consumption tax and closer to an income tax by retaining some taxes on capital gains and dividends at a 15 percent rate.
While the full proposals will take time to fully analyze once full details are presented, they present one major caution and one major concern.
The caution is that while there are many parts of the panel’s proposals that seem to have significant merit—especially in ways that might simplify the code by consolidating existing credits and incentives—we fear that the administration and a right-wing-led Congress will ultimately undo politically risky suggestions, or pursue only the parts that fit their prior ideological biases.
Read the full statement (PDF)

Filed under: Economics

Tax Panel

Went up yesterday…
President’s Tax Panel Takes on Tough Issues – Center for American Progress
The president’s tax reform panel recently resumed following its post-Katrina delay with the first of its final two public meetings. While the reform panel has not yet put forth any concrete proposals, it has begun to clarify some of its thinking on the tax issues confronting it.
The panel clearly believes that tax reform should be a high priority issue, and in recent days, we have seen some encouraging signs from the panel. We hope that its final report will contribute to a vital debate on our nation’s tax policy.
However, given the track record of the Bush administration’s decision-making on tax and economic policy, we fear that (1) the panel may ultimately reject the more balanced or progressive proposals, and (2) even if the panel develops such ideas, the administration will likely simply pick the elements that fit its prior agenda, and will throw out the rest.
Since reforming the tax code is largely about setting priorities and making choices about trade-offs across different parts of the code, we are not optimistic about what will eventually emerge after a right-wing-led political process is finished modifying the proposal.
We expect to see, when all is said and done, yet more of the same, failed tax policies that give yet more preferences to income from wealth and to high-income individuals, while ignoring work and the middle-class.

Filed under: Economics

National Retail Sales Tax

Looks like the president’s tax reform panel doesn’t like the idea of a national retail sales tax. I must say that I agree…

Tax Analysts Web Services: Tax Notes Today
For the retail sales tax, panel member Edward Lazear described options prepared by Treasury that showed rates of between 64 percent and 87 percent, depending on evasion levels, to replace the federal income tax with the sales tax and carve out exemptions for items such as prescription drugs, food, and clothing.
Lazear said that taxpayers in the lowest quintile would pay three times as much in taxes under such a plan. Also, he said, “the heart of the middle class would see a significant tax increase.”
With a partial replacement system, rates would range from 34 percent to 49 percent, depending on levels of evasion, if taxpayers were issued a “prebate” to help pay for necessities.
Lazear also said that it would cost $600 billion a year to implement a prebate.
Citing concerns over high rates and evasion, distribution, the cost of implementing the prebate, and complexity with states, Mack ruled the plan out.
“This is not an area which the panel wants to pursue,” he said.

Filed under: Background

RSCs vision

Ornstein at AEI is unhappy with the Republican Study Committee’s vision for the nation.

On Fiscal Policy, Congress Is in a Dream World
But even here, the kudos have to be diluted once one examines other offsets the RSC recommends in its 23-page report. It includes these smashingly great ideas for public policy:
* Eliminate the National Science Foundations math and science education program. Over the years, the nations biggest advantage in global competition is our edge in scientific excellence and technological innovation. We already are seeing that edge erode. Cutting science education is like eating ones seed corn. At current levels of funding, Newt Gingrich has called our basic research and science education commitment insane. What would cutting even further be? Criminally insane?
* Eliminate federal grants for wastewater infrastructure; reduce funds for waste disposal grants. We have serious water problems across the nation. The Louisiana catastrophe may leave many parts of the state without potable water for extended periods, making those regions effectively uninhabitable. Hello?
* Reduce funds for the Centers for Disease Control. Now this is an interesting idea to pursue just days after President Bush addressed the United Nations about the menacing danger of avian flu. That huge potential disaster, along with the threats of biological and biochemical attacks from terrorists, make up a critical share of the risks that could kill millions of Americans. The CDC is our front line to help track their advance, ameliorate their impact and find vaccines to prevent their spread. Yes, its a great time to make cuts!
I could go on and on. The offsets include eliminating family planning funding for teens (does the RSC want more unwanted pregnancies and abortions?); slashing funding for parks, fish and wildlife preservation and Forest Service maintenance; slashing funding for energy conservation, etc. Oh yes, and many of the cuts are for health care for the poor.

Filed under: Economics

WSJ Econoblog

WJS Econoblog

Econoblog: Post-hurricane reconstruction efforts will require reaching into the economic toolbox. How will policy makers decide what are the right tools for the job? Bloggers John Irons and Lynne Kiesling debate post-Katrina economic policy.

Filed under: Economics