This morning the Congressional Budget Office released new numbers for its projections of the federal budget through 2020. This is an update to the CBO’s score of the budget from March of this year.
There are two main government entities that put out budget numbers: the CBO (whose numbers were released today) and the Office of Management and Budget, which is the division of the White House in charge of writing the budget. Both put out budget numbers twice a year. We looked at the OMB’s Mid-Session Review last month. Here are the highlights from today’s CBO release:
- CBO estimates that the federal budget deficit for 2010 will exceed $1.3 trillion—$71 billion below last year’s total and $27 billion lower than the amount that CBO projected in March 2010.
- This year’s deficit is expected to be the second largest shortfall in the past 65 years: At 9.1 percent of gross domestic product (GDP), it is exceeded only by last year’s deficit of 9.9 percent of GDP.
- CBO projects that the economy will grow by only 2.0 percent from the fourth quarter of 2010 to the fourth quarter of 2011; even with faster growth in subsequent years, the unemployment rate will not fall to around 5 percent until the end of 2014.
Democracy Corps recently conducted a poll in which they asked the relative importance of cutting the budget deficit to economic growth: 51% of likely voters said reducing the budget deficit is so important to the nation’s future that we should consider “bold” spending cuts; 42% would focus on new spending to develop new skills and industries.
According to a Fox News poll, 63% of registered voters believe the government is so big that it is hurting the country. 32% (25% of Independents) said the size of the federal government was not hurting the country.
According to a poll by the Pew Research Center, 69% of registered voters say the budget deficit is “very” important to their vote this year. That’s behind the economy (90%), jobs (88%), health care (78%) and terrorism (71%) in terms of intensity.
The Treasury Department announced today a monthly budget deficit of $165 billion for July. The budget year-to-date deficit is now amounts to $1.17 trillion.
According to the Office of Management and Budget, the total deficit for the 2010 budget year is expected to be $1.47 trillion, the highest since WWII, adjusted for inflation. This is simply unsustainable. As numerous economists have warned, we face an unprecedented fiscaldisaster if overspending is not reined in.
In an encouraging story, the Washington Postreported yesterday that President Obama has ordered a freeze on bonuses to all federal appointees:
Obama is under intense political pressure to close the federal budget deficit, and the presidential memo he issued Tuesday night is the latest in a series of personnel decisions he has made to help do so.
Obama does not need legislation to enact the freeze he ordered Tuesday, which suspends “cash awards, quality step increases, bonuses and similar discretionary payments or salary adjustments” to any federal political appointee.
White House officials estimate that 2,900 employees will be affected by the order, which is projected to save the government $1.9 million a year.
“I appreciate the hard work of our Federal workforce, and understand how important these payments can be to many workers and their families,” Obama wrote in the memo. “Yet like households and businesses across the country, we need to make tough choices about how to spend our funds.”
We applaud the President for this measure of fiscal responsibility. This is an example of the difficult but necessary steps required to address our economic challenges. Click here to read the full article.
Today’s Wall Street Journalhighlights the harsh reality facing state government workers and their retirement benefits:
Lawmakers in at least 10 states have voted this year to require many new government employees to work longer before retiring with a full pension, or have increased penalties for early retirement. A similar proposal is pending in California. Mississippi, already among the states requiring more years of service for a pension, is weighing the additional step of increasing its retirement age.
Though lengthening lifespans have been expected to pressure pension systems, the looming fiscal predicament has emboldened lawmakers to demand more years from employees. Also, as many American states cut services, scrutiny has fallen on the compensation of public workers.
Changes to the retirement age won’t solve the most immediate financial problems that now face some public-pension systems, mostly because adjustments generally affect new workers. They aren’t expected to pay off for decades.
But generally, proposals have moved past resistance, partly because they apply to new hires. “People care most about things that affect them immediately,” said Mr. Burnett of Missouri.
In Europe, proposed changes to the retirement age are part of a broad effort to rein in the costs of a social safety net that has long been one of the world’s most generous. Changes would affect workers broadly, not just public workers.
The recent economic downturn has caused strife for state budgets across America. For FY2011, 46 states are on track to spend more than they will take in and will be forced to make tough choices to close their budget gaps. The longer states wait to deal with overspending, the harder and fewer their choices will be.
Here’s a look at some of this week’s most interesting, and consequential, budget- and economy-related issues in the 50 states:
Last week, the Las Vegas Review Journal published an editorial lamenting government’s fuzzy math when it comes to awarding “stimulus” money.
In the Denver Post, Amy Goodman argues that in order to really deal with the debt and deficit, defense spending has to be on the chopping block.
With Denver’s ballooning budget deficit, the Denver Post’s John Bennett makes the case for cutting the pay of Denver’s city council members. He points out council members in comparable sized cities in Colorado are paid much less.
On Tuesday, the Las Vegas Review Journal reported that 500,000 city and county government jobs across the country could be lost due to budget shortfalls.
Shane Goldmacher wrote yesterday in the Los Angeles Times that California is nearing the fifth week of the fiscal year without a budget. He reports that closed-door meetings have “produced little but tension and finger-pointing.”
A piece in today’s The Hill highlights Americans’ growing unrest with their nation’s growing deficits.
The federal budget deficit will matter more to voters this year than it has in the past decade, according to polls.
While it continues to trail the near-double-digit unemployment rates and overall state of the economy as a leading concern for voters, it is proving central to the 2010 election.
11 percent of those polled by Gallup said the federal deficit was the most important issue facing the nation … (this is) the highest point since the mid-1990s.
Referring to the explosion in spending, Michael Ettlinger, a vice president at the Center for American Progress Action Fund, warned Washington:
“You fought for it, you did it, you own it, you need to defend it.”
Today’s Investors Business Daily opines on the dangers of hiking taxes in attempt to address the deficit crisis.
The top 5% who will be targeted for tax hikes by the Obama administration at year end are the nation’s premier small business creators and entrepreneurs. The tax hike against the “rich” is in fact a tax hike on small businesses. The dirty secret is that small businesses usually don’t pay taxes, unlike corporations. The owners do.
The new taxes on “families” will poison small business formation and growth. As NewGeography.com executive director Joel Kotkin recently noted, “Family companies represent 60% of the nation’s employment and almost 80% of all new jobs.”
In our new slow-growth economy, total U.S. debt will grow from $6 trillion in 2008 to $23 trillion by 2020, estimates show. Deficits will average $1 trillion a year through 2020 at least.
The reason for this is clear: Runaway spending. Spending as a share of GDP — the most meaningful measure for government’s overall control of the economy — has jumped to 25% from its long-term average of 20%. Within a decade or two, it will pass 30%, then 35%. And so on.
Yet, (Treasury Secretary) Geithner thinks a tax hike is needed to “make sure we can show the world that we’re willing as a country now to start to make some progress bringing down our … long-term deficits.”
We’ve got news for Mr. Geithner: Europe and the rest of the world want nothing to do with the spending binge that this Congress and administration have undertaken, and which has brought the U.S. to the brink of financial ruin.
Instead, they’re cutting their spending and looking for ways to reduce the size of the states. And it may be working, as a Reuters headline suggests: “Europe’s Prospects Brighten As U.S. Fades.”
The Mackinac Center, a think tank in Michigan, is reporting that the city of Ann Arbor has spent $850,000 on a piece of art, while at the same time laying off firefighters.
The debate in Ann Arbor, where firefighters are being laid off due to a multimillion dollar budget deficit, is over an $850,000 piece of art.
That’s how much the city has agreed to pay German artist Herbert Dreiseitl for a three-piece water sculpture that would go in front of the new police and courts building right by the City Hall.
The city has the money to do it because in 2007, it agreed to set aside for public art 1 percent of money that went into capital improvement projects that were $100,000 or larger. Most capital projects involve streets, sewers and water.
Ann Arbor City Council member Stephen Kunselman, a Democrat, opposed the art deal.
“I think it is incredibly insensitive,” Kunselman said. “It is insensitive to the staff and their morale. It is insensitive to the community. There are people out there struggling financially, and here we are spending a large amount of money on a piece of art.”
Kunselman said the city is also eliminating the solid waste coordinator from the budget, which oversees trash pickup, and hiring an art coordinator.
Today marks the 100th day since Congress’ deadline for passing a budget has passed. Earlier this month, the House passed a budget “outline” that set next year’s spending levels but lacks any of the tough decisions or politically undesirable votes necessary for a real budget resolution.
This abandonment of long-term budgeting responsibilities is just one more example of Congress refusing to take fiscal responsibility seriously.
