Semi-Daily Journal

$350 billion isn't great, but it's a heck of a lot more reponsible than $550. Essentially, this gives Bush a couple of months to try to roll Snowe/Voinovich/McCain/Chaffee/Breaux (or some other conservative Democrat). Presumbably, if Snowe or Voinovich caves, Grassley is off the hook--I can't see him breaking his word otherwise.

It will be interesting to see how this plays out over the next couple of months. Expect lots of POTUS visits to Maine and Ohio and "independent" issue ads; this would be a good time to own a TV station in Bangor.

Congress wants to cut the dividend tax, Charles Swabb's proposal. I wonder how much of a tax cut that will be for him? I wonder what he will contribute to Bush in 2004. Bush must feel he owes these guys because he has gone way out on a limb for them.

My own newspaper had a full page ad wanting our senator to vote for dividend tax cuts. The ad was by some supposed senior citizen group wanting their retirement not to be taxed. Well excuse me but there are some very wealthy retired people that can afford to pay their way. Very little of the dividend money goes to people who are not wealthy. The dividend money that goes to lower income people is already taxed at a lower rate. There is nothing at all strange about this tax cut. The wealthy stepped up to the plate in 2000 and donated so much money to Bush that other more experienced candidates dropped like flies. In return, Bush has cut taxes for the wealthy by far more than they contributed to his campaign. It is no more than a partisan kickback scheme except there are no contracts involved.

I'm confused. I thought everyone projected US federal budget deficits long into the future. But today, AP says that the newly passed Congressional budget projects a $10 billion surplus. What gives?

"The budget is a nonbinding resolution used by Congress to outline tax and spending policy. It projects deficits will peak next year at $385 billion, then decrease gradually until a $10 billion surplus is reached in 2012."

Link: http://www.foxnews.com/story/0,2933,83957,00.html

What gives??

I'm confused. I thought everyone projected US federal budget deficits long into the future. But today, AP says that the newly passed Congressional budget projects a $10 billion surplus. What gives?

"The budget is a nonbinding resolution used by Congress to outline tax and spending policy. It projects deficits will peak next year at $385 billion, then decrease gradually until a $10 billion surplus is reached in 2012."

Link: http://www.foxnews.com/story/0,2933,83957,00.html

What gives??

I'm confused. I thought everyone projected US federal budget deficits long into the future. But AP says that the newly passed Congressional budget projects a $10 billion surplus. What gives?

"The budget is a nonbinding resolution used by Congress to outline tax and spending policy. It projects deficits will peak next year at $385 billion, then decrease gradually until a $10 billion surplus is reached in 2012."

Link: http://www.foxnews.com/story/0,2933,83957,00.html

What gives??

I started to write a comment but it got really long and I posted it here:
http://secretlyironic.com/archives/000198.html

Harold -

That projection on the part of the House is a crock of...well, feces. Don't even look at the House's projections. They're partisan. And although they assume a return to surplus in 2012, that's including the massive Social Security Surplus, which has to be paid back eventually to retirees. The House budget projects that we'll have a debt subject to the limit of 12 TRILLION DOLLARS in 2013, owed either to bondholders or Social Security beneficiaries. In 2013 alone, we'll have a deficit (not including SS Surplus) of over $300 billion.

If the House is right (and frankly, I think they're being optimistic about the level of spending we can cut and the tax receipts that will roll in), our debt will be over two-thirds of projected GDP at that time (if we're lucky and GDP grows that fast). Not exactly the best fiscal shape to be in when the largest demographic generation in history is retiring, becoming a huge drain on public coffers through reducing the tax base and needing more health care.

If you can handle a $12 trillion debt (at LEAST), then you should be very happy with the House bill.

Harold Prime

Thanks for the thought, particularly after my errant triple post. I appreciate it.

The 2012 surplus assumes that the Bush 2001 tax cut will expire as legislated originally in 2011. That means a tax increase, the income tax will return to 2000 levels and the estate tax would be back.

http://www.nytimes.com/2003/04/15/opinion/15KRUG.html

April 15, 2003
Behind Our Backs
By PAUL KRUGMAN -- New York Times

As the war began, members of the House of Representatives gave speech after speech praising our soldiers, and passed a resolution declaring their support for the troops. Then they voted to slash veterans' benefits.

Some of us have long predicted that the drive to cut taxes on corporations and the wealthy would lead to a fiscal dance of the seven veils. One at a time, the pretenses would be dropped — the pretense that big tax cuts wouldn't preclude new programs like prescription-drug insurance, the pretense that the budget would remain in surplus, the pretense that spending could be cut painlessly by eliminating waste and fraud, the pretense that spending cuts wouldn't hurt the middle class.

There are still several veils to remove before the true face of "compassionate conservatism" is revealed, but we're getting there....

Hoping to Seize Political Moment, Bush Pushes Tax Cut Plan
By DAVID STOUT - NYTImes

Hoping to seize the political moment, President Bush insisted today that he wants Congress to pass tax cuts totaling at least $550 billion over the next decade.

"The nation needs quick action by our Congress on a pro-growth economic package," Mr. Bush said in a carefully timed Rose Garden ceremony.

Alluding to the $550 billion figure, the president said, "American workers and American businesses need every bit of that relief now, so that people who want to find a job can find one, so that people looking for work are able to put food on the table for their families."

Harold:

Your question is simply answered by noting that the term government surplus (deficit) has multiple meanings. Some have suggested that the House numbers are based on a biased (if not partisan) forecast of spending and tax revenues, but let's suppose you and I had the exact same model of the future economy, spending, and tax policies. You forecast that the unified budget is balanced in 2010. My model must agree by construction. But then the unified budget is the sum of the general fund surplus and the Trust Fund surplus. Since the Trust Fund is projected to have a huge surplus for the next 10-plus years so as to build-up sufficient reserves to pay for the Social Security benefits of the retiring baby boomers, my model would focus on the general fund which is projected to be massively in deficit. Now some would say that the general fund deficit is not the best way to do long-term budget projections. Even I might agree that these "generational accounting" types have a better approach than my general fund deficit accounting, but they point out that general fund deficit accounting overstates the true problem. That the unified budget is projected to have a small surplus is no comfort even if these forecasts have any credibility (which others have suggested they do not).

Indeed, the Social Security trust fund will be in surplus for years. Though Republicans in Congress are intimating the Social Security and Medicare are in danger, the danger is the deficit in the rest of the budget being used as an excuse to reduce Social Security and Medicare benefits. Making either progam private, will result in a benefit reduction when we can least afford such a reduction.

Medicare Caught Up in Politics
By ROBIN TONER - NYTimes

Medicare is a fiscal time bomb, unsustainable over the long haul and badly in need of major structural changes to save it. That, at least, is what Republicans are arguing as they begin yet another effort to pass Medicare legislation, a central element of President Bush's domestic agenda....

To jd and lise:

Thanks to both for short but interesting posts. I am particularly puzzled by the position of Senator Zell Miller. He says he's for any and all tax cuts because he thinks Washington spends too much money. But the only spending proposal I have seen from Sen. Miller is his strong desire to have an expensive prescription drug benefit. He's also an advocate of more spending on education. He sounds a lot like President Bush - 'compassionate' when it comes to spending more and more but saying we need tax cuts because we spend too much. Does this add up?

" As the war began, members of the House of Representatives gave speech after speech praising our soldiers, and passed a resolution declaring their support for the troops. Then they voted to slash veterans' benefits."

Sure they did, Paul. From what to what?