Congress is more likely to act on pension reform than social security reform this year, according to today's BNA: "Congress ultimately may fail to find accord on Social Security reforms and instead pass more targeted pension reform legislation when it returns from its summer recess, sources who follow the issue told BNA Aug. 31." Michael Tanner, director of the Cato Institute's Project on Social Security Choice, told BNA Aug. 31 that Congress is likely to pass a pension bill, even if it fails to muster support for Social Security changes. "You could get a decent pension bill regardless of what happens with Social Security," Tanner said. Jason Furman, a senior fellow with the Center on Budget and Policy Priorities, rarely agrees with Tanner, a proponent of Social Security payroll tax-financed individual investment accounts. But Furman also said he expected Congress to act on pensions. "Something on the defined benefit [pension plan] side has to happen," Furman told BNA Aug. 31. Furman said he anticipated that Congress would feel compelled to pass provisions aimed at strengthening the funding of defined benefit pension plans and measures aimed at bolstering the federal pension insurer, the Pension Benefit Guaranty Corporation. "On Social Security, it is extremely unlikely that anything will be enacted by Congress. What the Republicans are trying to do is retreat from this issue," Furman said.

Federal Budget

• Congressional Budget Office Projections: No Change in Bleak, Long-Term Fiscal Outlook
• Economy and Jobs Watch: Continuing Bad News for Americans

The Government Accountability Office released a updated response to the Senate Finance Committee after an April hearing on the tax gap. The report released by GAO concerns the Internal Revenue Services' strategic approach to reducing the tax gap. The most recent IRS calculations put the tax gap - or the difference between how much should be paid in taxes and how much actually is - betwen $312 and $353 billion per year. The majority of this comes from underreporting of taxes owed by individuals and corporations. Interestingly enough, the current projections for the FY05 budget deficit fall smack in the middle of that range, at $331 billion. While there are many more problems with growing and persistent long-term budget deficits than closing the tax gap could fix, it is nonetheless an important problem needing to be addressed by Congress and the IRS.

About a month after the White House released its highly misleading and overly optimistic budget projections, the Congressional Budget Office (CBO) released their projections today. The CBO report projects a $331 billion deficit for FY05, a $33 billion reduction since they released an initial estimate earlier this year in March. CBO also has increased their estimate of the total deficits over the next ten years by more than $1.1 trillion to $2.1 trillion. These estimates are much more worrisome than OMB projections released last month as CBO and OMB differ over the ten-year deficits from 2006 - 2015 by more than $600 billion. Unlike the OMB numbers, CBO finds very little reason to be optimistic about the future health of the federal government. They write, "Although the deficit for 2005 is lower than previously expected, the fiscal outlook for the coming decade remains about the same as what CBO described in March." In March, CBO described a very dark future if current policies are continued. This CBO report casts further doubt on administration claims that their economic policies are working to spur strong economic growth and will continue to shrink deficits. CBO has confirmed what many private analysts have reported - that the recent jump in federal revenues are due to short-term and temporary factors that are unsustainable and that over the long-term, the country still faces many large and difficult fiscal challenges. CBO concludes, "Over the long-term, then, growing resource demands...will exert pressure on the budget that economic growth alone will not eliminate." Most strikingly, the CBO report states that if the tax cuts from the administration's first term are extended (with the exception of policies related to the alternative minimum tax), as President Bush has been strongly advocating, deficits over the next decade would increase $1.6 trillion on top of their current projections. The Senate Budget Committee's most senior Democrat Kent Conrad (D-ND) believes the nation needs a "serious fiscal wake-up call" if we are to correct the long-term budget shortfalls that "threaten our economic security." It's time for President Bush to be straight-forward with the American people and begin an honest conversation about adopting alternative policies that will return the country to a sound and sustainable fiscal foundation.