Yesterday, December 8th, President Bush asked Treasury Secretary John Snow to remain in his position for the next two years, at least. After meeting breifly with the President, he agreed. Snow first joined the Bush administration in February 2003 after former Treasury Secretary Paul O'Neill was ousted; prior to that, he headed CSX, a large railroad company. Snow's position as Treasury Secretary puts him in one of the nation's most central economic policymaking posts.

This announcement is particularly noteworthy because of the rumors that have been circulating recently regarding whether Snow would remain on board in the second term. On Monday, the New York Times even reported that "President Bush has decided to replace John W. Snow as treasury secretary and has been looking closely at a number of possible replacements, including the White House chief of staff, Andrew H. Card Jr., Republicans with ties to the White House say."

Despite the rumors, Snow will remain to help the administration sell its second term economic agenda to the public and Congress. This decision comes at a time of considerable economic uncertainty, as we are faced with an increasingly weaker dollar, a growing deficit, and looming discussions of both tax reform and an overthrow of the social security entitlement program. Mr. Snow, as today's New York Times states, is largely seen as a "salesman for White House policies."

For more information on Snow as Treasury Secretary, click here and here.

As President Bush faces a second term, one of his first actions will be to define his goals and lay out agenda for the next four years. As Bush outlined on November 3rd, two of his most ambitious plans include both reforming the federal tax code and making changes to social security, all while continuing to fight a war against terrorism.

While this ambitious agenda is perhaps helped by the fact that the President has majority support in both Houses of Congress, it is hampered by some of the policy changes he forced through during his first term. Bush begins his second term with the economy in somewhat of a different state than he faced when first taking office. While in 2000 the nation enjoyed a healthy budget surplus, this year has the nation facing a large deficit as well as growing homeland security and defense needs. Federal tax revenue was $100 billion lower this year than it was when Bush first took office. On top of this, spending was $400 billion higher. This large discrepancy between revenue and spending has helped to create the largest budget deficit in our history. And, in response to four years of rising budget deficits, the Treasury announced on Wednesday that the government will borrow $147 billion in the first three months of 2005, to help fund its programs and policies. This level of borrowing, when it occurs, will be a new quarterly record.

Thomas Mann of the Brookings Institution recently said, "On the domestic side, huge budget and current account deficits, historically low federal revenues as a share of GDP, the approaching retirement of the baby-boom generation, health care cost inflation, and escalating spending pressure for homeland security and defense will handcuff a president hoping to pursue new policy initiatives.

This administration will seriously be looking into trying to make permanent some of the tax cuts they passed over the last four years, and Bush has already laid some of the groundwork for this. Permanent tax cuts would greatly impact the amount of federal revenue collected by the government, and would cause even greater financial strain for agencies and institutions that rely on the government for funding. It is estimated that permanent tax cuts could cost the government $1 trillion dollars in revenue between 2005 and 2014.

When Bush sends his version of the budget to Capitol Hill early next February, it will clearly demonstrate how far this administration is willing to go to push the policies they outlined at both the Republican National Convention and on the campaign trail. For more information on second-term tax and budget issues, click here and here.

"In These Times," a magazine committed to extending political and economic democracy, is publishing a series of retrospective analyses of the Bush record this week. Along with tackling foreign policy, education, health care, and a variety of other issues, the series highlights five different economic areas where Bush's policies have gone awry. The article focuses on:

- Bush's jobs loss record

- The unprecedented rise in home prices

- The overvalued dollar and the trade deficit

- The threat that structural budget deficits will continue far into the future

- The effects of massive military spending on the U.S. economy

The article can be found here.

Last month the Congressional Budget Office (CBO) projected a $422 billion deficit for fiscal year 2004, and a $348 billion dollar deficit for FY2005. To see an OMB Watch analysis of this baseline projection read "Beyond the Baseline: 10 Year Deficits Likely to Reach $5.5 Trillion." As it turns out, the preliminary estimate released today is approximately $7 billion less than the CBO stated last month, according to their most recent Monthly Budget Review. Now they are reporting that the federal government incurred a deficit of $415 billion in FY2004.

This preliminary deficit figure is about $41 billion more than the FY2003 deficit, and 3.6 percent of the national Gross Domestic Product (GDP). Although it was reported that annual receipts rose by approximately 5.5 percent, they remain about 7 percent below their peak level in FY2000. And, according to the monthly review, individual income tax receipts remain approximately 25 percent below their peak in 2000. The drop in those receipts can be attributed to the recession, the decline in the stock market, and the Bush administration's tax cuts, the most recent of which were passed last week in a $146 billion package.

Interestingly, over half of the increase in receipts for FY2004 came from corporate income taxes, which ended up totalling approximately $57 billion more than they did in 2003. Federal income taxes paid by corporations can effectively serve to offset government outlays, and can bring down the budget deficit. Despite this fact, a study released in late September by the Institute on Taxation and Economic Policy (ITEP) and Citizens for Tax Justice (CTJ) found that between the years of 2001 - 2003, 275 of the nation's largest companies did not pay their fair share of income taxes; in addition many received excessive tax rebate checks.

A copy of the ITEP/CTJ report can be found here. Perhaps if corporations paid their fair share of taxes, and if federal legislation stopped handing out so many corporate tax breaks, we would see a decline in the deficit, which has been rising consistently since 2000.

Note: The figure $415 billion is the preliminary estimate for the national deficit; the Department of the Treasury will release the actual figure later this month.