April 2011

Rep. Van Hollen and the Congressional Black Caucus Unveil FY 2012 Budgets

Rep. Chris Van Hollen (D-MD), the ranking member of the House Budget Committee, has released his own budget proposal to counter that of Committee Chairman Paul Ryan (R-WI).

Van Hollen's plan reaches primary balance in 2018 by reducing the deficit by over $1.2 trillion more than President Obama's official FY 2012 budget proposal. The Van Hollen budget:

  • Echoes the President's call for a five-year non-security spending freeze, but with different policy recommendations.
  • Cuts security spending $308 billion below President Obama's request.
  • Provides no funding for Overseas Contigency Operations past 2015, saving $309 billion.
  • Reduces Agriculture Subsidies by $20 billion.
  • Patches the AMT and SGR.
  • Approves the level, but not the specifics, of President Obama's tax reform.
  • Extends 2001/2003 tax cuts for families earning below $250,000.
  • Creates Infrastructure Bank and fully funds Pell Grants and Food Stamps at the President's level.

This plan, while not as aggressive in strict deficit reduction as the other plans released, does have some meaningful deficit reduction. It does not go after the main drivers of our long-term debt, notably health care, but it does deserve praise for offering some specifics.

Additionally, the Congressional Black Caucus has released a budget blueprint of its own. The plan lowers deficits by $3.96 trillion over the next ten years. This represents yet another serious plan to reduce the nation's debt and deficits, including options for reforming the tax code and dealing with health care.

Some of the things the plan calls for are (savings are over ten years):

  • Tax capital gains and dividends as ordinary income, raising an additional $950 billion.
  • Financial Speculation Tax of 0.25 percent on stock transactions, raising an additional $835 billion.
  • Millionaire surcharge tax of 5.4 percent, raising an additional $573 billion.
  • Close certain corporate tax loopholes, raising an additional $1.3 trillion.
  • Creation of a public option for health care, which would save $88 billion.
  • Various increases in spending for investment.

Senators Graham, Paul, and Lee Introduce Social Security Reform Legislation

Yesterday, Senators Lindsey Graham (R-SC), Rand Paul (R-KY), and Mike Lee (R-UT) introduced the Social Security Solvency and Sustainability Act – Social Security reform legislation which would bring the program into 75-year actuarial balance through significant increases in the retirement age and by slowing the growth of benefits for higher earners. As CRFB has said before, raising the retirement age is a good idea. Working longer is one of the best things people can do for their own retirement, for the economy, and for the fiscal situation. And raising the retirement age would significantly improve Social Security's long-term finances.

The plan would speed up the increases in the normal retirement age that exist under current law, increasing 3 months each year starting in 2017 and reaching 67 by the year 2020 instead of 2027. The plan would continue to increase the retirement age 3 months a year thereafter until reaching 70 in 2032, and would then index it to life expectancy. By 2085, the retirement age would reach 72 and 3 months.

The plan would also increase the early retirement age from 62 to 64 by 2028, which many experts believe would substantially improve work incentives (though it would have almost no direct effect on Social Security's finances).

The plan also limits benefit growth for higher earners for new retirees. Beginning in 2018, new retirees will have benefits calculated based on wage-growth for their first $43,000 of lifetime earnings, and based on price-growth for earnings over the first $43,000.

This is a serious and thoughtful proposal, and we need more of them if we are going to put Social Security on a sustainable path. Some mixture of benefit cuts and tax increases will be necessary and should be enacted sooner rather than later.

The full text of the bill can be read here.

President Gives Major Fiscal Policy Speech Today

Today, President Obama outlined his plan for putting our country back on a firm fiscal path to deal with our long-term debt problem. This is a huge step forward and an important development in confronting our fiscal challenges. (Click here to read CRFB's reaction to the President's plan.)

The President began by laying out succinctly how we got to this point and why it is imperative that we confront our mounting debt. He came close to joining our “Announcement Effect Club” when he stated that “if our creditors start worrying that we may be unable to pay back our debts, it could drive up interest rates for everyone who borrows money – making it harder for businesses to expand and hire, or families to take out a mortgage.” He also noted the situation will get worse as the baby boomers retire.
 
Obama also confronted head on the misconceptions that preclude an informed public discourse of the subject. He mentioned how Medicare, Medicaid, Social Security, and national security account for about two-thirds of the federal budget, and how the recent budget haggling over domestic discretionary spending involved only 12 percent of the budget. As the President correctly noted, waste and abuse and foreign aid—popular targets—account for a miniscule portion of the budget. Tough choices will be required. He also took on many in his own party by declaring that reforms to Medicare, Medicaid, and Social Security will be required to ensure their long-term viability.
 
President Obama proposed a “balanced approach” to deficit reduction “that borrows from the recommendations of the bipartisan Fiscal Commission I appointed last year.” Obama’s plan calls for $4 trillion in deficit reduction over the next twelve years while the Fiscal Commission proposed about the same amount over nine years.
 
He presented a four-step approach to reducing the deficit: keeping domestic discretionary spending low; finding additional savings from defense; further reducing health-care spending; and reducing spending in the tax code (tax expenditures).
 
More specifically, President Obama proposed:
 
  • Cutting non-security discretionary spending by $750 billion by 2023
  • Cutting $400 billion in security spending by 2023
  • Strengthening the Independent Payment Advisory Board (IPAB) to reduce health-care spending growth
  • Eliminating the 2001/2003 tax cuts for upper income tax brackets when they expire in two years
  • Reforming the tax code in a manner that simplifies the system and raises revenue, namely by limiting itemized deductions for the wealthiest 2 percent of Americans (saving $320 billion over ten years) and building on the Fiscal Commission’s tax reform plan that substantially reduces tax expenditures
  • A “debt failsafe” trigger to ensure that, if by 2014 the debt-to-GDP ratio is not projected to stabilize by the end of the decade, spending cuts and reductions to tax expenditures will be required. The trigger is an important addition along the lines recommended by the Peterson-Pew Commission on Budget Reform.
 
The President also said that next month Vice President Biden will begin regular meetings with leaders in both parties with the goal of reaching agreement on a deficit reduction plan by the end of June. This process can build on the work of the “Gang of Six” senators who are working on a bipartisan, comprehensive fiscal plan.
 
Overall, the President offered a bold plan that seriously reduces the deficit. He focuses on most areas of the budget such as all of discretionary spending, mandatory spending, revenues, and further health-care reforms.
 
The framework offered by the President today is along the lines of what is needed to achieve the bipartisan support required to enact a plan. This is exactly the type of leadership we, and others, have been calling for from President Obama. As CRFB President Maya MacGuineas said in a statement today, “[i]t is extremely encouraging to have the President joining the discussion.”

Congressional Progressive Caucus Releases Their Budget

Today, the Congressional Progressive Caucus (CPC), a liberal group of Democrats in the House, released its own FY 2012 budget, "The People's Budget," which offers "a clear contrast" to the budget proposed by House Budget Committee Chair Paul Ryan (R-WI).

CPC's plan, coming on the same day that President Obama releases his long-term fiscal blueprint, takes a more liberal approach focused on defense cuts, and tax increases on upper-income Americans that are larger than those proposed by President Obama in his FY 2012 budget. The plan would lower the deficit by $5.6 trillion over the next ten years, achieving a surplus of $30.7 billion and debt of 64.1% of GDP in 2021, according to estimates provided by the CPC.

To reach these levels CPC proposes spending cuts of $869 billion and revenue increases of $3.9 trillion. It covers most areas of the budget including tax reform, defense, education, transportation and housing, and changes to Social Security and health care. Estimates of the plan avoid two major gimmicks by including in its baseline an extension of the AMT patch and "doc fix," two costly provisions not included in CBO's baseline, but which are routinely added by Congress. Overall, major measures in the plan include:

  • Allowing all of the 2001/2003 tax cuts to expire at the end of 2012, except those on upper incomes, which are eliminated immediately, but the CPC would retain some tax credits dedicated to middle-class families and children.
  • Implementing Rep. Schakowsky's Fairness in Taxation Act, which creates several new high-income tax brackets and taxes capital gains and qualified dividends as normal income for those with incomes above $1 million.
  • Limiting itemized deductions to 28% (although the CPC is not clear on this, we assume that itemized deductions can only reduce up to 28% of an individual's tax liability).
  • Modifying the estate tax to include a $3.5/$7 million exemption with progressive rate increases as the value of the estate rises.
  • Taxing U.S. corporate foreign income as it is earned.
  • Eliminating tax expenditures for oil, gas and coal companies, and reinstating Superfund taxes.
  • Enacting a financial crisis responsibility tax (the same as the one proposed by President Obama) and a financial speculation tax.
  • Enacting a health care public option.
  • Increase the taxable maximum to 90% on employee side of earnings for the payroll tax and eliminate the taxable maximum on the employer.
  • Ending emergency funding for Overseas Contingency Operations.
  • Investing $1.45 trillion in job creation, education, clean energy, broadband infrastructure, housing and research and development.
  • Creating a National Infrastructure Bank focusing on transportation at a cost of $213 billion.
  • Increasing motor fuel taxes by 25 cents, dedicated to the Highway Trust Fund.

This plan, which does achieve significant debt and deficit reduction, is unlikely to receive bipartisan support. Whereas Ryan’s budget left revenue unscathed (and barely touched defense spending) the CPC plan goes in the opposite direction, relying heavily on tax increases. While it is a serious proposal with specific recommendations, as we said about the Ryan budget, it is time to develop a solution that can garner broad support. Only by working together across the partisan divide can policymakers achieve the Goldilocks plan that is "just right" -- an effective plan that is realistic enough to be passed by Congress and enacted by the President.

EVENT -- Tax Reform Now: Cutting Rates and Deficits


Event Summary

On Tuesday, April 12, the Moment of Truth (MOT) project and the Progressive Policy Institute (PPI) co-hosted an event at the Johns Hopkins University School of Advanced Governmental Studies to focus on the urgent need for comprehensive reform of the U.S. tax code. PPI president Will Marshall got the event started and introduced the first speaker, Sen. Michael Bennet (D-CO), who spoke of the many reasons we must tackle our fiscal problems comprehensively and in a bipartisan manner. He noted from his recent experiences on the campaign trail and what he has seen at the many local town-hall meetings he has attended that our nation’s debt and deficits “came up in every single meeting”. He emphasized that voters are ready for Washington to lead on fixing our fiscal problems, that they understand that it will require shared sacrifice, and that the time to act is now.

Following Sen. Bennet was a panel discussion between Diane Rogers of the Concord Coalition, Paul Weinsten of PPI, Alan Viard of the American Enterprise Institute, and moderator Howard Gleckman of the Tax Policy Center on Reforming the Tax Code: The Case for the Modified Zero Plan. The panelists’ discussion focused on the tax provisions included in the final report of the National Commission on Fiscal Responsibility and Reform (Fiscal Commission). Specifically, they discussed the “Modified Zero Plan”, which called for reducing and consolidating tax rates; eliminating the Alternative Minimum Tax, eliminating most tax expenditures; reforming provisions for housing, health, charitable giving, and retirement; and raise $800 billion in revenue over the decade. The Modified Zero Plan’s potential bipartisan appeal in that it would drastically lower tax rates while also raising revenue was a main focus of the conversation, as was the important progress made by the Fiscal Commission on moving the tax reform debate forward.

Paul Weinstein and Marc Goldwein (CRFB’s policy director and a speaker on the event’s second panel) also released their paper on the Modified Zero Plan at the event. Less is More: The Modified Zero Plan for Tax Reform offers a more in-depth analysis of the plan, which both authors helped develop while working on the staff of the Fiscal Commission. (Click here to read the paper.)

Following the first panel were speakers Sen. Ron Wyden (D-OR) and Sen. Daniel Coats (R-IN). Sen. Wyden spoke about the tax reform legislation he and Sen. Coats recently co-sponsored and a few of its many advantages, including job creation, increased global competitiveness, and the fact that a simplified tax code would drastically reduce its significant administrative burden. Sen. Coats talked about the more wide-ranging goals of comprehensive tax reform, including simplicity, economic growth, and bipartisan appeal. He reemphasized the point that comprehensive tax reform must be part of any upcoming fiscal reform.

After a quick break for lunch, former Fiscal Commission member Dave Cote (president and CEO of Honeywell International) gave a great talk about tax policy’s essential role in increasing the United State’s global competitiveness. He was followed by the second panel of the day, which discussed possible failsafes and triggers designed to cut tax expenditures across the board in order to force action on reform. Panelists included Leonard Burman of Syracuse University, Marc Goldwein of CRFB, Joseph Minarik of the Committee for Economic Development, and moderator Derek Thompson of The Atlantic. The discussion focused on the need for tax expenditure reform and that any tax reform fail-safes should encourage action as well as ensure reasonable results if action is not taken.

 



Event Participants and Agenda

Where:  
     Johns Hopkins University, DC Campus
     1717 Massachusetts Ave, NWWashington, DC 20008
     Lecture Hall LL7

When:  
     Tuesday, April 12, 2011
     10:00am-1:30pm

Speakers:
  • Sen. Michael Bennet (D-CO)
  • Sen. Ron Wyden (D-OR)
  • Sen. Daniel Coats (R-IN)
  • Dave Cote, National Commission on Fiscal Responsibility and Reform
Panel 1: Reforming the Tax Code: The Case for the Modified Zero Plan
  • Diane Lim Rogers, Concord Coalition
  • Paul Weinstein, Johns Hopkins University
  • Alan Viard, American Enterprise Institute
  • Howard Gleckman, Tax Policy Center (Moderator)
Panel 2: Enforcing Reform: Designing Tax Expenditure Fail-safes and Triggers
  • Leonard Burman, Syracuse University
  • Marc Goldwein, Committee for a Responsible Federal Budget
  • Joseph Minarik, Committee for Economic Development
  • Derek Thompson, The Atlantic (Moderator)

This event was cosponsored by The Progressive Policy Institute and the Moment of Truth project, and is being hosted by the Center for Advance Governmental Studies at The Johns Hopkins University.

A Good Day for Tax Reform

With Tax Day rapidly approaching and our nation’s fiscal problems being fiercely debated, the timing of today’s events couldn’t be more perfect. We’re talking about this morning’s event – Tax Reform Now: Cutting Rates and Deficits – and the publication of two new papers, each of which present a unique approach to tax reform.

Capping Individual Tax Expenditure Benefits, written by Martin Feldstein, Daniel Feenberg, and CRFB president Maya MacGuineas, presents a new approach to tax reform: capping the amount that tax expenditures as a whole can reduce each individual's tax burden. More specifically, the paper's analysis focuses on the effects of setting the cap at two percent of the individual's adjusted gross income. It estimates that in 2011, this reform would raise $278 billion in revenue and simplify the tax code by pushing 35 million people into the standard deduction. The paper looks at how this approach would affect individual tax expenditures and revenues in general, as well as the effects of setting caps at different levels. (Click here to read the full paper)

Less is More: The Modified Zero Plan is written by CRFB policy director Marc Goldwein and Paul Weinstein and published by the Progressive Policy Institute. The paper explains the evolution of the Fiscal Commission's "Modified Zero Plan" for tax reform, a plan which both authors helped to develop while on the Commission staff. The Modified Zero Plan would reduce and consolidate tax rates, eliminate the Alternative Minimum Tax, eliminate most tax expenditures, reform provisions for housing, health, charitable giving, and retirement, and raise $800 billion in revenue over the decade. The authors argue that this approach would encourage economic growth, simplify the tax code, reduce the tax gap, increase progressivity, and improve the nation's fiscal situation. (Click here to read the full paper)

The Modified Zero plan was also the focus of one of the panels at today’s tax event hosted at Johns Hopkins University, Tax Reform Now: Cutting Rates and Deficits. Much of the conversation about the plan focused on its potential bipartisan appeal; a plan that lowers rates across the board, broadens the base, and manages to raise more revenues (not to mention makes the system fairer, simpler, and more efficient) is a reform that could have something for members of both parties. Co-sponsored by the Moment of Truth project and the Progressive Policy Institute, the event also featured a panel on designing enforcement mechanisms or triggers in order to force action on tax reform. Both panels featured expert speakers and offered interesting and thoughtful insight into reforming our tax code.

The event also featured several prominent speakers, including Sen. Michael Bennet (D-CO), Fiscal Commission member Dave Cote, as well as Sens. Ron Wyden (D-OR) and Sen. Daniel Coats (R-IN), who recently proposed their own tax reform bill. All of the speakers emphasized the urgency of comprehensive, bipartisan tax reform. Many also praised the tax reform proposals put forth in the final report of the Fiscal Commission.

The event was a wonderful success and really showed how much bipartisan support there is behind comprehensive tax reform. Hopefully momentum behind this issue will continue to build and real progress will be made in the near future.

PS: Click here for some of CRFB's ideas on tax expenditures.

MY VIEW: Laura D'Andrea Tyson

In her recent column for the Economix blog of The New York Times, CRFB board member Laura D'Andrea Tyson focuses on an issue that's received considerable attention in recent weeks -- the U.S. corporate tax system. She mentions various approaches to reforming the way we tax corporations and potential advantages of reducing the corporate tax rate.

Click here to read the full commentary.

"My Views" are works published by members of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the Committee.

 

Final Details of Budget Deal Released

Today, lawmakers released the final details of the budget deal struck late Friday night. CBO also released a final score of the appropriations for the remainder of the year. The deal will cut spending by $38 billion compared to 2010 levels and $78 billion compared to the President's budget.

Looking at each of the appropriations categories, most will be seeing a reduction from 2010 levels--with the largest savings (percentage-wise) coming from Commerce-Justice-Science (21 percent reduction) and transportation spending (24 percent reduction). Overall, defense spending will increase by $5 billion this year.

It should be noted that of the $38 billion in spending cuts, nearly half stem from changes in mandatory programs (or CHIMPS in budget-speak) and so do not represent a permanent reduction in allocations for some appropriations categories. For instance, changes to highway contract authority and other mandatory savings will be re-categorized as mandatory savings at the end of the year. In addition, a reduction of $6.2 billion came from the 2010 census, which was just a temporary increase for 2010 and helped to make overall Commerce-Justice-Science cuts appear larger.

 

 (Budget Authority, Billions) FY 2010 Enacted President's 2011 Request
FY 2011 Budget Deal FY 2011 Budget Deal (Percent Below 2010)
Non-Defense/Non-Security        
Agriculture, Rural Development, FDA $23 $23 $20  15%
Commerce, Justice, Science $64 $61 $53  21%
Energy and Water Development $33 $35 $32  3%
Financial Services and General Government $24 $25 $22  9%
Interior, Environment $32 $32 $30  7%
Labor, Health and Human Services, Education $164 $171 $158  4%
Legislative Branch $5 $5 $5 0%
State, Foreign Operations $50 $57 $48 4%
Transportation, HUD $68 $69 $55  24%
Domestic and International Spending (Subtotal) $462 $478 $422 9%
         
Defense, Security, and Veterans Spending        
Defense $508 $531 $513 -1%
Homeland Security $43 $45 $42  2%
Military Construction, Veterans Affairs $77 $76 $73  5%
Security Spending, Subtotal $627 $651 $628  0%
         
Total, Regular Discretionary $1,087 $1,128 $1,050  4%

* Numbers rounded to the nearest billion. Totals may not compute due to rounding.

 

It was reassuring to see lawmakers reach a bipartisan agreement--albeit in the 11th hour (literally!)--on an issue that became very contentious. Now the debate in Washington can move on to more important issues, including the debt ceiling and our broader fiscal challenges. We hope that lawmakers can continue to search for bipartisan solutions to our mounting deficits.

 

President Obama Will Use Simpson-Bowles Plan As Model for Deficit Reduction

Update: Rep. Chris Van Hollen (D-MD), the ranking Democrat on the House Budget Committee, also offered his support for Fiscal Commission's recommendations saying that "The basic approach of Bowles-Simpson, which is to look at both sides of the deficit equation, that is revenue and spending ... I believe does provide, in that sense, an important starting point."

We blogged yesterday that President Obama will be putting forth his own plan to reduce the deficit this week. It's now being reported that in presenting his plan, he will offer support for the final report put forth by his National Commission on Fiscal Responsibility and Reform late last year.

The final report of the Fiscal Commission was supported by a bipartisan majority of Commission members and reduces the deficit by nearly $4 trillion through 2020. The bipartisan group of senators known as the "Gang of Six", led by Sens. Mark Warner (D-VA) and Saxby Chambliss (R-GA), have been working on a comprehensive deficit-reduction plan based on the Fiscal Commission's recommendations.

Click here to read the full article in this morning's Washington Post, and make sure to check back with The Bottom Line for important updates.

‘Line’ Items: Back from the Brink Edition

Deal on FY 2011 Spending Reached – A government shutdown was averted on Friday by an 11th hour agreement on federal spending for the rest of the fiscal year. The deal will cap 2011 appropriations at just under $1.050 trillion, reducing spending by about $38 billion from current levels. Congress passed a one week extension shortly after the deal was announced to allow time for the agreement to be drafted into legislation and enacted. The House is scheduled vote on the legislation enacting the budget agreement on Wednesday, with the Senate likely voting afterwards. With the often-tense negotiations resulting in an accord which prevents an embarrassing shutdown of federal government operations, the question is: did the process improve the prospects for more bipartisan consensus down the road by establishing trust and good will between the leaders who conducted the negotiations, or will the bases of both parties that are unhappy with the deal entrench deeper for the next battle, making agreement more difficult?

On to the Next Budget – The day after voting on the budget for the remainder of this year, the House is set to begin consideration of next year’s budget on Thursday and a vote on the floor is scheduled for Friday. The GOP-controlled House is expected to pass the budget resolution unveiled by House Budget Committee Chairman Paul Ryan (R-WI) last week, which would reduce the deficit by more than $4.4 trillion over the next decade as compared to President Obama’s FY 2012 budget proposal issued last month. The Ryan budget would reduce the national debt to 67.5 percent of GDP by 2021, largely through deep cuts to domestic discretionary spending and major restructuring of Medicaid and Medicare. Ryan’s plan will have some company in the budget debate; last week the Republican Study Committee (RSC) released a budget with even more ambitious spending cuts, reducing debt to just over 55 percent of GDP in 2021. The RSC’s polar opposite, the Congressional Progressive Caucus (CPC), also plans to produce a budget plan. According to the CPC outline, it will reduce national debt to 64.4 percent of GDP by 2021. The CPC relies heavily on increased revenues, wheareas the Ryan and RSC proposals do not raise taxes. The CPC plan would result in spending and revenues both balanced at 22.3 percent of GDP by 2021, while the RSC plan would freeze both levels at 18 percent of GDP. The House Democratic leadership and the Congressional Black Caucus are also expected to produce budget plans. While all these ideas are welcome and the shared goals of reducing the debt are a very encouraging sign, it is time for both sides to put everything on the table and get to work on developing a plan that can achieve bipartisan support and that deals with all parts of the budget. Senate Budget Committee Chair Kent Conrad (D-ND) is holding off on his budget resolution while the “Gang of Six” senators continue their talks on a comprehensive fiscal plan that is based on the recommendations of the White House Fiscal Commission. According to the New York Times, the group is close to announcing an agreement.

Debt Ceiling Debate Reaching a Peak – With the concerns over a government shutdown addressed, eyes are turning to the next big battle, over increasing the statutory debt limit. The debt ceiling fight could make the just concluded shutdown showdown look mild in comparison, with the stakes much higher. Treasury Secretary Tim Geithner warned last week that the limit will be reached no later than May 16 and that the Treasury can only take action to avoid a U.S. default until around July 8 if the ceiling is not raised before then. Economists warn that allowing the U.S. to default on its obligations would have catastrophic implications for the economy. Many lawmakers want to pair an increase with deficit reduction measures such as a balanced budget amendment, while the White House prfers a clean debt limit increase. See CRFB’s ideas for responsibly raising the debt limit here.

As Pressure Mounts, President Steps Up – The White House became more and more involved as the budget negotiations reached a climax. Now it looks as though President Obama will maintain a high profile in the ongoing fiscal debate. On Wednesday the President will outline his ideas for reducing the national debt in a speech. President Obama was criticized by CRFB and many others for not adequately addressing the debt in his recent budget. His entry into the debt discussion is welcome and could advance the search for solutions, depending on how specific he is willing to get. We will be watching.

Don’t Forget About Taxes – All the discussion over spending cuts and shutdowns has drawn attention from the fact that Tax Day (April 18) is fast approaching. Fortunately (unless you’re still scurrying to file your taxes) several events this week will call attention to the issue of tax reform. On Tuesday, the Moment of Truth Project and the Progressive Policy Institute will co-host a forum on the urgent need for comprehensive tax reform. Speakers include Senators Michael Bennet (D-CO), Ron Wyden (D-OR) and Dan Coats (R-IN) as well as Fiscal Commission member and Honeywell CEO Dave Cote. Wyden and Coats no doubt will discuss their recently-introduced legislation to fundamentally revamp the tax code. On Wednesday both the Senate Finance and House Ways and Means Committees will hold hearings respectively examining how tax reform can help reduce the deficit and how the burdens imposed by the complexity of the tax code illustrate the need for reform.

Coburn-ing Budget Calories – Sen. Tom Coburn (R-OK) took advantage of the open-amendment process on popular legislation (S. 493) to renew the Small Business Innovation Research and Small Business Technology Transfer programs to advance several deficit-reduction measures last week. One of the approved amendments (SA 273) requires the federal government to eliminate, consolidate or streamline programs identified in a recent Government Accountability Office report as duplicative or overlapping. It includes review of tax expenditures. It is supposed to save at least $5 billion. Sen. Mark Warner (D-VA) was a co-sponsor. It passed 64-36. Another amendment (SA 223) ends federal jobless benefits to people who earned $1 million or more the previous year. Coburn says it will save $20 million a year. It passed 100-0. And two other amendments accepted eliminate funding for the National Historic Covered Bridge Preservation Program, saving $8.5 million, and require that every year the federal government identify and list publicly every federal program, including their mission, goals, purpose and budget.

What Panetta Could Mean for the Pentagon – CIA Director Leon Panetta is reportedly one of the names being considered to replace Defense Secretary Robert Gates, who will be stepping down. Panetta is a former House Budget Committee chair, OMB director and White House chief of staff, as well as a former CRFB chair. One of his initiatives at the CIA has been to prepare the agency for budget changes due to rising federal budget deficits. An appointment as Secretary of Defense could bring such planning to the Pentagon.

Key Upcoming Dates

April 12

  • March federal budget deficit figures from the Department of Treasury.
  • February international trade deficit figures from the Department of Commerce.
  • Moment of Truth Project/Progressive Policy Institute forum on “Tax Reform Now: Cutting Rates and Deficits” from 10 am to 1:30 pm.

April 13

  • Federal Reserve releases its “Beige Book” economic outlook survey based on anecdotal information gathered by each Federal Reserve Bank by district and sector.
  • House Ways and Means Committee hearing on “How the Tax Code’s Burdens on Individuals and Families Demonstrate the Need for Comprehensive Tax Reform” at 10 am.
  • Senate Finance Committee hearing on tax reform and perspectives on deficit reduction at 10 am.

April 14

  • Weekly unemployment claims data released by the Department of Labor BLS.
  • House Oversight and Government Reform Committee hearing on “State and Municipal Debt: Tough Choices Ahead” at 9:30 am.

April 15-17

April 15

  • The current “bridge” continuing resolution (CR) funding government operations expires. Congress must adopt legislation reflecting the spending agreement for the rest of Fiscal Year 2011 by then.
  • Statutory deadline for Congress to enact a Fiscal Year 2012 Budget Resolution.
  • Inflation figures for March released.

April 18

  • Deadline to file federal tax return.

May 16

  • Treasury Secretary Tim Geithner says that the statutory debt limit will be reached no later than May 16.

July 8

  • Treasury Secretary Tim Geithner says that U.S. will default on its obligations by around July 8 if the statutory debt limit is not increased before then.

President and Leaders in Congress Agree on FY 2011 Spending Levels

Keeping us on the edge of our seats until the very end, Speaker John Boehner (R-OH) announced late Friday night that a deal had been reached on spending levels for the current fiscal year, just an hour before a government shutdown was set to occur. Though the President and leaders in Congress agreed to a six-month CR, a one-week CR was enacted to give Congress time to put the agreement into legislative language. The details of that CR are not crystallized yet except for the overall funding level (about $38 billion below 2010 levels, $78 billion below President Obama's 2011 request), but we do have some idea of what is in it, which you can see in today's Wall Street Journal.

  • Agency cuts: According to WSJ, the CR would cut $13 billion from the President's request for 2011 from the Departments of Labor, Education, and Health and Human Services. This represents about a $5 billion reduction from 2010 levels. Still, it seems that Obama's priorities, specifically Head Start and Pell Grants, were preserved. State Department and foreign-aid programs will be frozen at 2010 levels, which represents an $8 billion cut from the President's budget. The Defense Department will get off easy, getting a $5 billion increase in its budget from 2010 levels, although this is less than the levels proposed by both the President's budget and Congressional Republicans.
  • Policy riders: The most talked about policy rider in the final days before the shutdown was a provision which would have denied Planned Parenthood the ability to use federal funds for abortions. However, this rider was not included in the final package, nor were any of the other proposed riders, including one which would have prevented EPA from regulating greenhouse gases and another to defund health care reform. The package did include two DC-related riders -- one that would revive a school voucher program and another that would prohibit the DC government from funding abortions. As part of the deal, the Senate also agreed to hold two up-or-down votes: one on Planned Parenthood funding and one on defunding health care reform.
  • CHIMPs/Mandatory cuts: As Senator Schumer (D-NY) and other Democrats had called for, the package includes "changes in mandatory programs" (CHIMPs) which essentially allows some mandatory cuts to be counted as discretionary. In fact, almost half the savings -- $17.8 billion of the $38 billion -- comes from cuts to mandatory programs. This does include two changes to the health care reform law that will affect mandatory spending. These changes would cut $2 billion from the budget for non-profit health insurance co-operatives (the CO-OP program, which is intended to function as a weaker version of the public option) and it would eliminate a part of the law that would allow low-income earners to opt out of employer-sponsored health insurance to purchase insurance on the new exchanges. Other details about the CHIMPs are unknown at this point.

We will have further coverage of the deal in its entirety when the final specifics are announced. With the battle over funding for FY 2011 behind us, leaders in Congress and the Administration must now look toward dealing with some much more significant fiscal challenges in the coming weeks, with the debt ceiling limit due to be reached just as negotiations over the budget for FY 2012 and beyond heat up.

MY VIEW: Maya MacGuineas

In her latest commentary for CNN Money, CRFB President Maya MacGuineas discusses her experience at a budget forum in Colorado this weekend and says that unlike many Washington politicians, voters are ready for real fiscal reform.

Click here to read the full commentary.

Ms. MacGuineas also wrote a Washington Post op-ed this weekend focused on the need for a "Goldilocks budget" that's just right -- not President Obama's proposal ("too tepid") or Chairman Ryan's ("too lopsided"). She also tell us not to lose hope, saying:

As contentious as the political environment seems today, remember that the last government shutdown was followed by an eventual budget deal between President Bill Clinton and the GOP. If we replace denial with reality and posturing with cooperation, we might just pull it off again.

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"My Views" are works published by members of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the Committee.