The National Association for Business Economics (NABE) cunducted one of their biannual surveys from February 28th - March 8th of this year. The survey questioned economists, and results showed that a greater percentage of respondents believe the deficit is a greater short-term threat to Americans than terrorism. In the August 2004 survey, 40 percent of respondents named terrorism as the biggest threat, and 23 percent named the deficit the biggest threat. With 2004 deficit levels hitting a record high ($412 billion) and the President and Congress continuing to try to push through new tax cuts and extend old ones, it appears that many economists now view our deficit as a much more serious matter. In this survey, 27 percent of respondents noted the deficit as the largest threat, and 23 percent noted terrorism. The trade deficit, cited by 15 percent, and energy prices, cited by 11 percent, also rose in importance when compared with results from last August. Interestingly, 70 percent of respondents felt that Social Security had problems that need to be resolved, and the solution which received the highest rating (3.7 on a 5 point scale) was raising the retirement age. Privatization of the system received a rating of only 2.7. The rest of the results can be seen here.

The budget resolutions currently under consideration in the House and Senate are in line with the President's priorities and propose cuts to Medicaid as well as the extension of tax cuts. The budget resolutions propose to cut funding for Medicaid by approximately $15 billion over five years, and in the same breath propose costs of $23 billion to extend dividend and capital gains tax breaks. As the Center for American Progress notes, "The Medicaid cuts would have important implications for states’ budgets and for health care for the poor. At the same time, the budgets under consideration contains tens of billions of dollars in new tax cuts, which would overwhelmingly benefit those best able to make the sacrifices necessary to reduce the deficit." The Center has compiled state-by-state data which shows how the proposed Medicaid cuts would affect individual states. To contrast these cuts, the Center also has data showing the magnitude of the proposed tax cuts in each state. The report can be read here.

In creating the budget blueprint for FY 2006, many members of Congress are looking to extend the dividend and capital gains tax cuts, which are slated to expire in 2008. The high costs of these tax provisions will add to our already record-level deficits and have negative long-term economic consequences. Economists at the Congressional Research Service and the Brookings Institution have concluded that extending these tax cuts would add to deficit levels and in fact cancel out many positive effects proponents of the tax cuts state they will have. Click here for more information. While the administration and many Congressional GOP leaders are pushing to extend the dividend and capital gains tax cuts, they continue to ignore a tax problem that is increasingly affecting middle class tax payers: the alternative minimum tax. The alternative minimum tax was originally created to prevent very wealthy people from exploiting tax loopholes and not paying their fair share. However, because the tax is not adjusted for inflation and because it applies mainly to people whose income tax bills are low relative to their income, it is affecting more and more people every year. By 2010 it is estimated that people who make under $100,000 and owe the tax will pay an additional $1,321 in federal income taxes, while alternative tax payers who make between $100,000 and $200,000 will owe an additional $2,592. As an editorial in today's New York Times points out, by 2010, the Bush tax cuts alone will cause an additional 17 million taxpayers to owe the alternative tax. By 2014, "assuming the Bush tax cuts are made permanent, 40 million taxpayers will owe the alternative tax, nearly half of whom would never have faced it but for the tax cuts." While Bush and many members of Congress push to cut taxes for the wealthy by extending the dividend and capital gains tax cuts, they are effectively raising taxes on the middle class. Click here to read the editorial. Click here for another good column from the National Journal on why Bush's proposed tax cuts are unnecessary given the current economic environment.