Key Findings

• Despite recent statements by the President, Vice President, and certain Congressional leaders that tax cuts pay for themselves, economists from across the political spectrum — including the Administration’s current and former chief economists — reject this notion. Further, the Treasury Department’s own analysis of the President’s tax cuts confirms common sense and conventional wisdom; it concludes that, even under favorable assumptions, the tax cuts would generate added growth that would offset no more than 10 percent of their long-term costs.
• During the current business cycle, both revenues and the economy have been weaker than in the typical post-World War II business cycle. Even taking into account the stronger revenue growth OMB now projects for 2006, real per-capita revenues have simply returned to the level they reached more than five years ago when the current business cycle began in March 2001. In previous post-World War II business cycles, real per-capita revenues have grown by an average of about 10 percent over the first 5 ½ years of the cycle.
• Revenues grew much more quickly in the 1990s, when taxes were raised, than in the 1980s, when taxes were cut. Revenues in the current decade, with its large tax cuts, are also expected to grow much more slowly. Based on the Administration’s own projections of revenue growth through the end of the decade, revenues in the current decade will grow at less than one fourth their growth rate in the 1990s.

Key Findings:

• The President and Congressional Republican leaders are advocating “sunset commission” proposals, which are expected to come to the House floor in late July.
• The leading sunset bills before Congress have a distinctly partisan slant. A bare majority of commission members, appointed by Republican leaders, could recommend elimination of various programs and agencies, as well as of various rules and regulations. The programs, agencies, and rules and regulations could then be eliminated without a single vote in favor of elimination being cast by a member of the minority party either on the commission or in Congress, and with members of the minority party barred even from offering amendments on the House floor.
• Successful commissions traditionally are formed to operate in a bipartisan fashion. The pending sunset-commission proposals, in contrast, would make it possible for program terminations and cuts to be implemented on a strictly partisan basis, even if they do not have enough support to be enacted under normal procedures.
• Moreover, the commission’s mission itself would be ideologically skewed. The commission would be prohibited from proposing to eliminate or scale back any of what the GAO, OMB, and CBO refer to as “tax expenditures,” which are the roughly $800 billion spent each year on special interests and others through the tax code.

Key Findings

• Claims that the SOS proposal (similar to Colorado’s TABOR) will improve Michigan’s economy are unfounded.
• Colorado had a strong economy in the years after its adoption of TABOR, but research shows that TABOR was not the cause of this economic growth.
• Differences between Colorado's economic growth rate and that of Michigan are attributable to differences in the states' geographies, populations and economic bases that long predate TABOR; SOS would do nothing to change these factors in Michigan’s favor.
• Far from improving the economy, SOS would likely hinder the state’s economic development by preventing adequate investments in schools, higher education, infrastructure, and transportation.

Key Findings

Nevada state expenditures would have to be $780 million lower in FY 2007 if TASC had been effective since the 1991-93 biennium. A reduction of this magnitude could be achieved by taking all of the following actions: 

• Cutting 3,740 K-12 teachers
• Eliminating health care insurance for the 31,000 children covered under SCHIP
• Eliminating all professor positions at UNLV and UNR
• Incarcerating 1,300 fewer inmates
• Eliminating all funding for Economic Development and Tourism Reducing other programs by $445 million

Key Findings:

• Line-item veto legislation recently approved by the Senate Budget Committee would significantly enhance Presidential power. The President could wait up to a year after enactment of an appropriations bill before proposing to cancel funding in that bill. And while Congress would have to vote on the President’s veto proposals within 13 days of his submitting them, he could continue withholding funds for 45 days, even if Congress quickly rejected his veto requests. The President could wait to submit vetoes until summer, causing the funds for some programs to lapse by withholding them through the end of the fiscal year even if Congress rejects the vetoes.
• In addition, the President could package vetoes of egregious pork items that had received damning publicity with vetoes of meritorious programs he opposed on ideological grounds — and force Congress to vote up-or-down on the package as a whole with no amendments allowed. This could lead to the cancellation of programs a majority of Congress considers worthwhile.
• The Congressional Budget Office, the Congressional Research Service, columnist George Will, and other analysts have concluded that line-item veto legislation is as likely to increase expenditures as to reduce them, because a President could use this new authority to pressure Members of Congress to support some of his spending and tax-cut priorities in return for a promise not to propose canceling appropriation items they favor.
• The bill also would enable the President to veto both increases in entitlement programs and new “targeted tax breaks.” But the type of tax breaks that could be vetoed is heavily restricted. The President could veto a change in an entitlement that would aid millions of poor children or elderly people, but most tax breaks would be immune.

Key Findings:

• The number of food stamp recipients changes with the economy.  During the late 1990s it fell for six straight years, in part because of the strong economy. Since 2001 it has risen because of the recession, the continuing increase in poverty, and the weak gains for low-income working families during the recovery.
• Higher food stamp caseloads also reflect the provision of temporary relief to about 4 million victims of last year’s hurricanes, as well as modest eligibility expansions and increased participation among eligible households.
• Higher food stamp caseloads are not the result of errors in the program.

Key Findings

Discretionary caps proposed by the Senate Budget Committee would lock in overall discretionary funding levels for the next three years at the levels proposed in the President’s budget. If implemented in accordance with the President’s detailed blueprint for reaching these dollar goals, the caps would have the following effects (among others):

• In 2009, many domestic programs would face substantial cuts, including the Food Safety Inspection Service (9.5 percent), WIC (8.4 percent), Vocational and Adult Education (73.5 percent), EPA’s clean water and drinking water revolving funds (19 percent), low income home energy assistance (48.6 percent), supportive housing for people with disabilities (54.4 percent), and discretionary funding for child care (8.8 percent);
• As many as 680,000 women infants, and children could lose WIC; up to 73,900 children could lose Head Start, and 420,000 seniors would lose food assistance under the Commodity Supplemental Food Program; and,
• The cumulative effects on individual states would be substantial. For example, in 2009, cuts in elementary and secondary education funding for Texas alone would total $103 million.

Key Findings:

The new TANF rules:

• are too narrow, limiting states' ability to place parents with disabilities and other special needs into specialized services so they can find work;
• make it difficult for states to engage recipients in important and effective education and training activities;
• are unrealistic about the difficulty in juggling training and child-rearing; and
• penalize states that provide assistance to children after their parents reach the time limit.

Key Findings

• Senate Republican leaders are pushing a measure the House passed last week to permanently eliminate most of the estate tax. They also have endorsed a measure the Senate Budget Committee passed June 20 to make far-reaching changes in the budget rules. That bill requires deficits to be reduced to 0.5 percent of GDP in 2012 and succeeding years, and triggers automatic across-the-board cuts in all entitlement programs except Social Security if the targets would be missed.
• CBO estimates show that if the Bush tax cuts are extended, deficits will exceed the targets the Budget Committee bill sets by almost $200 billion a year in 2012 (and more in succeeding years), even after the large cuts the Budget Committee bill calls for in discretionary programs are made. This gap would have to be closed by entitlement cuts (unless tax cuts are scaled back or revenues raised in some other manner, or discretionary programs are cut even more deeply).
• The costly estate-tax measure coming to the Senate floor thus would trigger deep entitlement cuts under this approach. Every dollar in lost estate-tax revenue would trigger an additional dollar in entitlement program cuts.
• Under the automatic budget cuts in the Budget Committee bill, the legislation to eliminate most of the estate tax would trigger cuts over the 2007-2016 period of: $121 billion in Medicare, $64 billion in Medicaid and SCHIP, $10 billion in SSI benefits for the elderly and disabled poor; $8 billion in veterans benefits, and $3 billion in school lunch and child nutrition programs. The entitlement-program cuts would dwarf those contained in the budget reconciliation bill enacted earlier this year.

Key Findings

• The line-item veto legislation would expand Presidential power to a greater degree than has been commonly understood.
• If the President proposed to cancel funds appropriated for a program, Congress would have to vote on his proposal within 14 legislative days of the President’s submission. But the President could continue withholding the funds until 90 days had passed, even if Congress had turned down his request.
• The Congressional Budget Office, the Congressional Research Service, columnist George Will, and other analysts have concluded that line-item veto legislation is as likely to increase expenditures as to reduce them, because a President could use this new authority to pressure Members of Congress to support some of his spending and tax-cut priorities in return for a promise not to propose canceling appropriation items they favored.
• The legislation also applies to increases in mandatory programs (i.e., entitlements) and, in theory, to new “targeted tax benefits.” In fact, its application to new, special-interest tax breaks is largely non-existent, because “targeted tax benefits” are defined in the legislation as tax breaks that benefit only a single person or entity. Thus, the President could cancel a change in a mandatory program serving millions of needy children or elderly people, but special-interest tax breaks benefiting as few as two large corporations or two wealthy investors would be exempt.

Key Findings

• The Administration has justified its opposition to reinstating the Pay As-You-Go rules by claiming that the budget baseline rules treat tax cuts unfavorably as compared to entitlement increases, and that PAYGO would reinforce this inequity.
• This claim is devoid of merit: the budget baseline rules treat expiring tax and entitlement provisions exactly the same way.
• There is a special baseline rule that applies when entire entitlement programs expire, but the treatment of such programs under that rule provides no advantage over the treatment accorded tax cuts.
• An Administration proposal would alter the baseline rules so the costs of making the 2001 and 2003 tax cuts permanent would be incorporated into in the baseline, with the result that legislation to make these tax cuts permanent would be scored as having zero cost. This would represent a flagrant new budget gimmick.

Key Findings

• Some of the revenue increase appears to have been caused by growing income inequality rather than general economic improvement.
• The current deficit — and the resulting increase in debt — are substantially worse than the historical norm, especially for a period of economic recovery.
• Running a $300 billion deficit burdens future taxpayers; it causes the debt to grow faster than the economy, which is not sustainable on an ongoing basis.
• At this stage in the business cycle — 4½ years after the bottom of the 2001 recession — the deficit should be much lower than $300 billion. Lower deficits are necessary to increase national saving — which is at historic lows — in order to better prepare the nation for the coming retirement of the baby-boom generation.
• As Goldman Sachs has said, the current surge in revenues likely is due in part to temporary factors, and the rate of revenue growth is expected to slow in coming years.