U.S.
tax policy is urgently in need of reform. Our tax system is overly complex and
has failed to keep pace with changing economic conditions. The current economic
crisis has led to an escalating budgetary shortfall, which will exacerbate the
already significant fiscal challenges facing the country. Moreover, looming
changes written into the tax law will require Congress to make major decisions
regarding the tax code. On December 31, 2010, most of the tax cuts passed in
2001 and 2003 ("the Bush tax cuts") will expire. In… more
We are currently in the midst of two immense economic challenges: an immediate and severe financial crisis, which has already wiped out over $20 trillion in global wealth; and a longer-term fiscal crisis, which existed before the financial crisis but will be made worse because of it.
From: Robert Bixby, William Galston, Ron Haskins, Julia Isaacs, Maya MacGuineas, Will Marshall, Pietro Nivola, Rudolph Penner, Robert Reischauer, Alice Rivlin, Isabel Sawhill, Eugene Steuerle
The Fiscal Roadmap Project was created to help
policymakers navigate the serious economic and fiscal challenges facing the
country.
Currently, fiscal policy is being shaped in a haphazard
way: bailing out a firm here, letting another firm go bankrupt there; attaching
conditions to a company bailout, writing a check to another company without
strings attached. These are not ordinary times.
The fiscal year 2009 deficit could reach over one trillion dollars, according to an analysis by the Committee for a
Responsible Federal Budget (CRFB). This deficit would be more than twice as
large as the 2008 deficit of $455 billion and would represent a post-war record
both in nominal terms and as a share of GDP.
"These numbers are simply astonishing," said Maya
MacGuineas, president of CRFB. "Of course we can't try to balance the budget
right now when the economy is in such turmoil, but… more
In light of the
current state of the economy, it appears likely that Congress will pass another
stimulus package...
The Committee for a Responsible
Federal Budget recognizes that there is a strong enough risk of a prolonged
recession that a fiscal stimulus package may well make sense. Given the many
risks associated with a significant downturn, it makes sense to err on the side
of caution in determining whether more stimulus is appropriate. Assuming
Congress proceeds with plans to offer some type of stimulus package, CRFB
offers three… more
One
of the most pressing issues facing policymakers in the United State
is rising health care costs. Cost growth
is putting ongoing stress on the budgets of families, employers, and
governments. The U.S.
already spends $2.2 trillion a year - 16 percent of GDP - for health care. Nearly a third of this comes from the federal
government.
Health
expenditures are projected to nearly double to $4.3 trillion in a decade, at
which point they will represent nearly one-fifth of the economy. According to the… more
The next president will have to
address fiscal imbalances within the government and a dramatically rising
federal debt. National debt has been on
a more or less steady rise since 1974 when, after a steady decline from the
massive debt accumulated during WWII, it hit a low of 33.6 percent of GDP. Total national debt was more than $10
trillion at the start of fiscal year 2009.
This rising debt is driven by
entitlement growth, resulting from demographic… more
Social Security is the single largest government program. In 2007, the program cost $585 billion and provided benefits for roughly 50 million retirees, dependents, survivors, and disabled workers. It is financed primarily through the payroll tax -- a 12.4 percent tax on wages up to $102,000. The tax is split equally between employees and employers. The remaining revenues come mainly from the taxation of Social Security benefits for wealthier recipients.
Next year, the program’s surpluses will begin to decline precipitously. The… more
The United States is in the midst of an economic crisis. Financial
institutions are failing, the credit markets are frozen, and global
stock markets have experienced large-scale losses. This crisis has also
had significant effects on the "real" economy. Home values have
tumbled, consumption has dropped, and jobs are disappearing.
During economic downturns, the government regularly takes actions to
try to combat the effects of the decline. Most of its actions fall into
one of four categories: monetary stimulus, fiscal stimulus, targeted… more
The United States faces serious fiscal challenges. Large budget deficits have returned, and shifting demographics along with growing health care costs are putting intense pressure on the long-term federal budget outlook. Over time, sustained deficits will weaken the economy and adversely affect the American standard of living.
Children are a declining priority in the federal budget -- a trend that shows no signs of stopping. In 2007, the federal government paid out $2.7 trillion through spending programs and disbursed roughly another $1 trillion through the tax code. Rapidly expanding entitlement programs -- Medicare, Medicaid, and Social Security -- and the country's defense system consumed the largest shares of the budget, while spending on children remained essentially stagnant and did not keep up with growth in the economy.
The United States faces a number of serious fiscal challenges. Budget deficits are back, the economy has weakened, Social Security is unsound, growing health care spending is putting immense pressure on the budget, tax policy is at a major crossroads, and borrowing is projected to reach unsustainable levels. Politicians will have to take concrete steps to confront these challenges, and some level of sacrifice will be required. The sooner decisions are made, the better-both because it will give the public… more
In an economically mobile market economy, individuals and families are able to raise their private incomes, wealth, and ability (sometimes referred to as human capital) over time and across generations. In the United States, many associate economic mobility with the pursuit of the American Dream. Education, work experience, and saving enhance the opportunity for upward economic mobility. To this end, many federal spending and tax expenditure or tax subsidy programs
aim to enhance economic mobility. But exactly how much does the… more
The authors of this paper are longtime federal budget and policy experts who have been drawn together by a deep concern about the nation’s long-term fiscal outlook. Our group covers the ideological spectrum. We are affiliated with a diverse set of organizations. We have been meeting informally for over a year, under the auspices of The Brookings Institution and The Heritage Foundation, to define the dimensions and consequences of the looming federal budget problem, examine alternative solutions, and reach… more
The single greatest threat to the fiscal health of the United States is the runaway growth of the
nation’s major retirement and health care entitlement programs. Social Security and Medicare
are projected to grow from 7.5 percent of GDP today to almost 13 percent of GDP by 2030.
Already, the two programs consume over a third of the federal budget. The total present value
of costs that will exceed earmarked revenues of Social Security and Medicare over the next 75
years is $41 trillion, or,… more
Click here for a brief video discussion of this idea.
While it appears the federal government will spend around $2.8 trillion this year, there is another $700 billion that is "spent" through the tax code in the form of tax expenditures. This shadow budget represents subsidies disbursed by way of taxes not collected.
While politically popular, tax expenditures are an inefficient, poorly targeted, and… more
Click here for a brief video discussion of this idea.
For more than 70 percent of American families, the payroll tax is the largest tax they pay. Yet the tax is regressive, inefficient, and insufficient to fund the programs it finances. As a 15.3 percent wage tax levied on employers and employees, it deters job creation and depresses wages at the low end of… more
The three of us -- former aides to President Clinton, Senator McCain, and President Bush -- did an experiment to see if we could develop a reform plan that we could all support. The Liebman-MacGuineas-Samwick (LMS) plan demonstrates the types of compromises that can help policy makers from across the political spectrum agree on a Social Security reform plan. The plan achieves sustainable solvency through progressive changes to taxes and benefits, introduces mandatory personal accounts, and specifies important details that… more
The tax code is backwards in many ways. It discourages saving, job creation, and economic growth while encouraging consumption, energy dependence, and environmental degradation. It has become less progressive at a time when income inequality is growing and it bestows the largest targeted tax breaks on those who need them least. It has failed to keep up with changes in the global economic environment, harming U.S. competitiveness. It is highly complex, non-transparent, and it does not raise enough money to… more
