CNN is reporting that the Treasury is having to take measures to avoid going into default...

U.S. dangerously close to debt limit

The Treasury Department suspended investments in a federal employee pension fund Thursday to keep the government below its borrowing limit, Treasury Secretary John Snow said in a letter to Congress.

Snow said payments to the $56 billion Federal Employee Retirement System's Government Securities Investment Fund, known as the G-fund, would be restored once Congress raises the $7.384 trillion debt ceiling. [...]

The government was just $10 billion below the limit as of Tuesday, according to the latest available data.

Congress adjourned for an election break last weekend without raising the politically sensitive limit. [...]

Congress has already raised the debt limit twice during the Bush administration's tenure, in 2002 and 2003.

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.

Yesterday, the Joint Committee on Taxation released an updated score on the "chairman's mark" of the FSC/ETI bill. (See http://www.house.gov/jct/x-68-04r.pdf.)

Overall, the score raises $238 million in revenue, although there are several gimmicks which are used to keep the costs down (see http://www.cbpp.org/10-4-04tax.htm.)

• The repeal of the exclusion of ETI will cost $57.7 billion.
• Under title VIII, there are revenue provisions to close loopholes and raise some fees, which raise a total of $81.7 billion

The revenue enhancements from the repeal of the ETI regime and the loophole closings thus total $139.4 billion. (Note that this total would come close to paying for the $146 billion price tag of the "middle class" tax cut.)

Rather than using this money to finance cuts in other areas of the tax code or pay off the debt, the bill gives over $139 billion in additional tax cuts primarily to businesses.