The US Budget Watch Blog

October 10 - Gene Steuerle released an opinion piece
yesterday arguing that the United
States is due for a new "fiscal turning," or
a fundamental reorientation of the government's approach to economic
policy. Steuerle identified a first fiscal turn in the period after the
Revolutionary War, when the young country expanded the financial powers
available to the federal government. The second fiscal turn came at the
beginning of the 20th century, when the country modernized its
banking system and created an income tax. Now, Steuerle declares, the
country is in need of a third fiscal turning. He writes that:

"The third fiscal turning, like the first two, is about far more than fixing
programs we know need to be fixed. It's about creating flexibility and slack
for government. It's about making possible the resources necessary to modernize
and meet new needs, many of which we cannot yet identify. It's about removing
automatic and eternal built-in growth in programs - not so much because they
failed or succeeded in meeting past needs, but because their constant claim for
more and more automatically means less and less for other, potentially more
worthwhile endeavors, both public and private."

October 10 - In Thursday's Washington Post, David Broder expressed dismay
at the insistence from both presidential candidates on continuing to advocate
for the bulk of their campaign spending and tax promises, which US Budget Watch
estimates at well over $300 billion. Calling
the move a "stunning rejection of reality," Broder said the candidates had
squandered an opportunity during the debates to tell the American people how
and where they would adjust the nation's spending priorities. He continued:

"If either
of them has a clue what to do to help stabilize this tottering economy, he is
keeping it to himself... Even when they have been specific, it is hard to credit
their words. Both have promised broad tax reductions targeted to different populations.
But neither has given any indication how the promises will stand in the face of
the massive new spending needed to rescue embattled financial institutions. Absent any reliable information about their
programs, voters must fall back on an examination of their records and
characters."

October 9 - Yesterday, the Lewin Group released a new report that
analyzes the differing effects of the candidates' health care proposals on
spending, coverage, and other relevant areas.
Among the study's most important conclusions, it determined that McCain'
plan would reduced the number of uninsured by 21.1 million people in 2010, while
Obama's plan would reduce the number of uninsured by 26.6 million. In the 2010-2019 time period, the report calculated
that McCain's plan would cost the federal government $2.05 trillion, while
Obama's would cost 1.17 trillion. McCain's
plan would decrease public coverage by 5.4 million people, and increase private
coverage by 26.5 million. Obama's plan
would increase the public coverage by 48.3 million, while decreasing private
coverage by 21.6 million.

October 9 - At a Wednesday
campaign rally, John McCain maintained his commitment to balancing the
budget, saying he would "confront"
the national debt and balance the budget by the time he left office. Though McCain's
statement left open the question of whether the budget would be balanced by the
end of four or eight years, it did represent the first time McCain had
mentioned the pledge since the financial crisis intensified and Congress signed
a $700 billion rescue package.

October 8 - The Committee for a Responsible Federal Budget
held two panels to discuss the recent fiscal crisis and its effect on future
policy. The first panel, which featured Mark
Zandi, Martin Baily, Rob Dugger, Dean Baker, and Tim Adams, examined the
conditions that made the bailout necessary, the prospects for recovery, and some
actions the government might take to avert further crisis. The second panel, featuring Leon Panetta, William
Frenzel, Alice Rivlin, Rudolph Penner, and David Walker, discussed how the
bailout and overall crisis should affect future policymaking, the current and
future status of the US
budget, and advice for the next presidential administration. Attendees to the event also received a
handout with the October
update to US Budget Watch's "Fiscal Voter Guide to the 2008 Election."

October 8 - The second presidential debate gave both candidates numerous
chances to discuss the state of the economy, restate their tax and spending
plans, and criticize their opponent's fiscal record. The candidates also mentioned the national
debt and deficit multiple times, and discussed how urgently they would
prioritize entitlement reform. McCain
stated that he would attempt to reform entitlements at the same time as he made
progress on other concerns like energy policy and healthcare, and Obama said
that although he couldn't promise he would tackle entitlements in the first two
years of his presidency, he wanted to address them sometime in his first term.
One of the
more notable new developments in the debate came from McCain, while he was
discussing the bailout package:

October 8 - In today's Wall Street Journal, Andrew Biggs
and Kent Smetter of the right-of-center American Enterprise Institute attempt
to reframe the debate around the candidates' tax proposals by comparing the current
rates of taxation to the rates that would take effect if Obama or McCain's
plans were implemented. Addressing the argument made by some that
McCain's plan is inequitable because the top one-fifth and one percent of
taxpayers would see the most money back, the authors claim that, owing to the
greater share of federal taxes paid by top earners to begin with, the top
one-fifth of earners would actually pay a 1 percent greater share of all
federal taxes than before, and the total federal taxes paid by the top one percent
would decrease by just 0.3 percent. The authors also call attention to
the effect of the candidates' plans on marginal tax rates, and assert that
Obama's plan would create higher marginal taxes for the largest earners.

October 7 - Tomorrow morning (Wednesday, October 8th) at the
National Press Club, the Committee for a Responsible Budget will host two panel
discussions on the recent financial crisis and its potential effects on the US budget. Panel
speakers will include experts from government, think tanks, and private
industry. If you are interested in
attending the event, please sign up.

October 6 - On Sunday, McCain's senior policy advisory Douglas Holtz-Eakin
told reporters that the cost of McCain's health insurance tax credit would be
offset (and achieve budget neutrality), in part, by reducing Medicare and
Medicaid spending. The bulk of the $5000 per family credit would be
offset by eliminating the tax exclusion for employer-provided health
insurance. This would still leave a hole of roughly $90 billion in 2013 -
although it would shrink over time and eventually become self-financing. While
not revealing exactly where this money would come from, Holtz-Eakin pointed to
eliminating fraud and reforming Medicare payment policies. We estimate savings
of roughly $40 billion from the policies Senator McCain has already proposed.