Congress Raises Debt Limit, Fails To Pass Intelligence Bill

While members of Congress were unable to complete work on the omnibus spending bill or the intelligence bill during the lame-duck session, they did manage to complete their work on the debt limit.

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Federal Spending Hits Ceiling Forcing Treasury to Act

Last week, federal spending again reached the debt limit put in place by Congress -- the legal amount, above which the federal government cannot borrow. If borrowing exceeds this ceiling, currently set at roughly $7.4 trillion, immediate action is necessary. Treasury Secretary John Snow was recently forced to take action to ensure that normal monetary transactions can continue.

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A Tale of Two Deficits -- Trade and Budget

In the past few days, the government released separately two numbers showing record deficits: The final fiscal year 2004 federal budget deficit of $413 billion -- the highest dollar value on record A monthly trade gap in August rising to $54 billion -- the second highest on record.

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Congress Spends $146 Billion To Extend Certain Tax Cuts Without Offsets

Congress voted to extend so-called "middle-class" tax reductions last week, and chose not to offset any of the cost of the $146 billion measure. In addition, the bill also includes $13 billion in tax cuts for businesses. When factoring in the additional interest costs, the bill will increase the deficit by over $200 billion.

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Deficit Hits All-time High, Many Corporations Don't Pay Fair Share

Washington, DC, Sept. 22, 2004--The result of recent tax policy choices is that the 2004 deficit has reached an all-time high of $422 billion dollars. The Congressional Budget Office reported this month that only 11% of the FY 2004 deficit was due to cyclical factors, while 89% of the deficit was result of federal policy decisions. Not only is the current deficit the highest it has ever been in dollar terms, but in a recent analysis, OMB Watch Staff Economist John Irons projected that the deficit will reach $5.5 trillion over the next ten years. In addition, a new study released today by the Institute on Taxation and Economic Policy (ITEP) finds that many of the country’s biggest corporations are not paying their fair share of federal income taxes.

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Balanced Budget Amendment Could Destabilize Economy, Tie U.S. Hands

WASHINGTON, D.C., September 20, 2004 -- The House of Representatives is again set to consider an ill-conceived constitutional Balanced Budget Amendment (H. J. RES. 22). The House Judiciary Committee is scheduled to address the proposal this Wednesday, September 22. Regardless of one’s opinions about the wisdom of balancing the budget or running massive deficits, the Balanced Budget Amendment is exceptionally bad economic policy.

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Return of a 'CYA' Budget Policy

The long-ago defeated proposal for a balanced budget constitutional amendment is rearing its ugly head once again. Unable to pass a budget this year and having created near-record deficits, some members of the House are desperate to create the appearance of being fiscally responsible, and are considering bringing up a vote on the measure (H. J. RES. 22).

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Economy and Jobs Watch: Cyclically Adjusted Deficit Reaches Record High

The cyclically adjusted deficit -- that is, the deficit adjusted to remove economic fluctuations -- reached an all-time high of $374 billion in 2004 according to a new report by the Congressional Budget Office. As a share of the overall economy, the cyclically adjusted deficit at 3.2 percent of GDP is at its highest levels since the early 1990's -- and has been exceeded in only 7 of the last 42 years (see chart below.)

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Action Alert! The Unfortunate Return of the Balanced Budget Amendment

The full House Judiciary Committee met on September 22 to consider, once again, the ill-conceived constitutional Balanced Budget Amendment (H. J. RES. 22). The issue will most likely be revisited by the House Committee sometime next week, although it is currently unknown exactly when. Regardless of one’s opinions about the wisdom of balancing the budget or running massive deficits, the Balanced Budget Amendment is exceptionally bad economic policy. Download Press Statement - (.pdf, 1pp) Download Factsheet - (.pdf, 1pp) Take Action!

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Beyond the Baseline: 10 Year Deficits Likely to Reach $5.5 Trillion

Deficits not "cut in half" in 5 years.

The Congressional Budget Office's (CBO) September 2004 "The Budget and Economic Outlook: An Update" shows a baseline projection of a $422 billion deficit for 2004, and $348 billion for 2005. The 10-year baseline projections show a $2.3 trillion deficit over the next ten years; however, as the report notes, the baseline is not intended to be a good predictor of actual budgetary outcomes. A better predictor of budget deficits under "current policy" would put the deficit for 2005 at $405 billion and the 10-year deficit over $5.5 trillion.

With the increase in retirees necessitating increased Social Security and Medicare expenditures, the situation is not projected to improve after 2014 either, unless, of course, the direction of current policy is significantly changed. The CBO's report demonstrates that freezing discretionary spending will not solve the deficit problem; and that not extending the Bush tax cuts helps more, but also won't completely solve the longer term problem.

As the CBO put it "[e]ven if the economy grows more rapidly than projected, significant long-term strains on the budget will start to intensify within the next decade as the baby-boom generation begins to reach retirement age." Download full report (.pdf)

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