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Obama's FY 2014 Budget on Social Security
Posted By: Dan Barrett - 04/09/13

With budget fever gripping the Beltway policy world and state government inner circles, there are plenty of questions and skepticism on what President Obama's FY 2014 Budget will plan for the country's biggest expenses: government-subsidized health care and retirement entitlement programs. Though the budget is due to be released on tomorrow, some details have already come out on what taxpayers can expect and what this all means for the nation's bottom line. In an analysis by the Fiscal Times, many experts predict few surprises and many repeat proposals from the Obama 2013 Budget. I examine Social Security in the first of three posts. Note: Figures are in ten-year windows (not the usual five-year increments under the BillTally project).

Where it's at: According to the Social Security Administration, the regular retiree program has run a deficit (i.e. its expenditures are higher than the Trust Fund's non-interest receipts from withholding taxes) for the past two years and will continue upwards at an annual average of $66 billion between 2012 and 2018. The budgetary outlook could worsen. Deficits will likely increase sharply as the Baby Boomer generation enters retirement and the pool of workers expected to shrink, relative to reitrees. Jagadeesh Gokhale of the Cato Institute says that the disability portion of Social Security is the real worry because more people have been applying, which has mounted budgetary pressure, so much so that the program may default on benefits by as early as 2016.

What the budget might do:

  • Institute Chained CPI ($130 billion):  By changing how cost-of-living adjustments is calculated for retirees, future payments would likely not be as high as projected as compared to traditional determinations. The change could also push taxpayers into higher tax brackets earlier than expected (a revenue boom for the program but a bust for workers). The concept does have some opponents including the AARP, many Congressional Democrats, and experts who support other options.
  • The FY 2013 Budget also listed a few smaller efforts that could result in a net $3 billion savings, though most of that is improving collections of information on state and local pensions, which may end up costing more than it saves.

For better or worse? Much of the focus is not on Social Security but on the other two big programs. This is likely a timely issue where Social Security is seen as at least momentarily solvent and will stay that way long after Medicare is expected to default. Chained CPI and the already proposed measures may temporarily help guarantee retirees benefits for a longer period of time but the program will eventually need serious reform and, like all of these programs, the sooner sustainable reforms occur, the less it will cost taxpayers. However, none of this addresses the disability portion of Social Security, which would need a bailout in a very short amount of time.

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The Late Edition: April 9, 2013
Posted By:  - 04/09/13

Today’s Taxpayer News!

NTU recently joined Citizens Against Government Waste and a host of GOP senators in supporting Senator Marco Rubio’s REFUND Act. Read the full story from The Shark Tank.

This National Review article looks at the Senate’s budget proposal, and concludes the numbers just don’t add up.

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Obama's FY 2014 Budget on Medicaid
Posted By: Dan Barrett - 04/09/13

In this final post, I delve into what President Obama's FY 2014 Budget might do to Medicaid funding. Note: Figures are in ten-year windows (not the usual five-year increments under the BillTally project).

Program update: Using Congressional Budget Office data, the Kaiser Commission on Medicaid and the Uninsured projects an average eight percent spending increase for each of the next ten years, which is mostly due to the program’s expansion under the Affordable Care Act. Like Medicare, Medicaid costs are also expected to up-tick with many recipients getting older and requiring more costly care more often. So, in the short run, Medicaid and CHIP (the children's version of Medicaid) spending will increase by $638 billion before FY 2023.

What’s projected:

  • Eliminate Pay-For-Delay Drug Agreements ($753 million): Currently, drug companies are incentivized to pay generic drug makers to not reproduce their patented drugs for years at a time so that the company who created the drug gets compensated for research, development, and marketing costs. Possibly resulting in savings to Medicaid and even Medicare, President Obama would cut these agreements.
  • Expand Program Integrity (Unknown): In late 2012, the Government Accountability Office analyzed options for eliminating duplicative programs and improving efficiency under the Centers for Medicare and Medicaid Services (CMS). GAO found that an estimated $21.9 billion of Medicaid in FY 2011 expenditures were improper. Though the government should be fighting waste, fraud, and abuse, it is unclear how much more spending would be allocated to enhance integrity programs that are already in effect.
  • Empower the Independent Payment Advisory Board ($3.1 billion): Since its creation in 2010, IPAB has not yet made recommendations to change health care spending but CMS is tasked with starting IPAB’s work this year. In the past, the Congressional Budget Office has cited that the Board could save tax dollars but also said that the savings projections are "extremely" uncertain but maintains that the Board would save $3.1 billion over ten years.
  • The FY 2013 Budget called for the eventual reevaluation of payments made to Disproportionate Share Hospitals and a phased down provider tax credit threshold, among other smaller provisions. All told, these other measures could total $51.6 billion over ten years.

What this means: Given the Affordable Care Act’s broad expansion of Medicaid, it is difficult to say whether these reforms would mean real savings for taxpayers or if they could even stem the tide of high costs that are likely to occur. The Fiscal Times credited these three measures with a $25 billion savings but they are uncertain, conditional, and perhaps overly optimistic. Just as with Medicare, the full amount of savings do not make up for the projected growth in outlays and more fundamental reform (or revenue increases) are required.

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Halfway There: A Mid-Year Budgetary Review
Posted By: Michael Tasselmyer - 04/07/13

Six months into Fiscal Year 2013 (which began on October 1, 2012), the Congressional Budget Office (CBO) released its "Monthly Budget Review" on Friday with some comparisons showing how the United States' fiscal situation looked at this point last year.

Through March, CBO projected a 6-month deficit nearly $178 billion less than was recorded at the same point last year. The projection is largely due to an increase in tax revenues -- total outlays are only projected to be $46 billion less than in 2012, but revenues were $132 billion higher. Individual income tax receipts jumped 14.7%, while a combination of tax hikes on some income brackets, and the expiration of the payroll tax cut in January lead to an $85 billion increase in tax receipts withheld from workers' paychecks.

cbo fy13 halfway revenues

Federal outlays were about 2.5 percent lower over the first half of Fiscal Year 2013 compared to the first half of Fiscal Year 2012. At $315 billion, defense and military spending saw about a 6 percent decrease compared to the $335 billion the government had spent at the halfway point last year. Within the broad "Other Activities" category, relief efforts in the wake of natural disasters such as Hurricane Sandy and severe drought conditions lead to an increase in outlays at the Federal Emergency Management Agency and Department of Agriculture, respectively. These were offset by a decrease in payments to Fannie Mae & Freddie Mac, and a decrease in TARP funding.

Overall, spending decreased slightly in some areas. However, major entitlement programs such as Social Security, Medicaid, and Medicare all saw growth in payments of at least 5 percent. Increased tax revenues still seem to be driving any modest deficit reduction seen so far.

cbo fy13 halfway outlays

As the April 15 individual income tax filing deadline nears, the IRS reported a decrease in the number of tax returns it had received compared to this point last year.

Interestingly, nonwithheld receipts of individual income taxes were $14 billion higher than at the same point last year. CBO attributed that increase to taxpayers shifting income they otherwise would have received in 2013 to late 2012 instead, in order to avoid paying higher tax rates effective at the start of the new calendar year.

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The Late Edition: April 3, 2013
Posted By:  - 04/03/13

Today’s Taxpayer News!

NTU’s Brandon Arnold discusses corporate tax reform and the one year anniversary of the U.S. having the highest corporate tax rate of any industrialized nation. Read the full story in the Washington Times.

The State of California’s taxing and spending approach to budgets is catching up with it --- to the tune of a nearly $23 billion dollar deficit for fiscal year 2011-2012, according to the Sacramento Bee.

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Made It in America, Government Gives You Millions
Posted By: Dan Barrett - 03/29/13

Throughout the last two years of budget negotiations, debt ceiling fights, and the supposedly economy destroying sequestration, legislators have pointed to government grants as an easy way to cut down on spending. Yet indiscriminate across-the-board cuts in one form or another have occurred without eliminating what many Americans feel are real cases of government waste. Here’s just one government grant that we could do without: the Department of Commerce’s Make it in America Challenge.

From a 2012 summary, $40 million of federal tax dollars will be made available to levels of state and local governments as well as nonprofit organizations in the form of up to 15 projects, each at $4 million maximum allotments. Grants will be used to “encourage insourcing, either through on-shoring of productive activity by U.S. firms, fostering increased foreign direct investment, or incentivizing U.S. companies to keep their businesses and jobs here at home, as well as train local workers to meet the needs of those businesses.” Funds will be provided through the existing budgets of:

  • Economic Development Administration (Department of Commerce);
  • National Institute of Standards and Technology Extension Partnership (Department of Commerce);
  • Employment and Training Administration (Department of Labor);
  • Rural Community Advancement Program (Department of Agriculture); and
  • Rural Business Opportunity Grant Program (Department of Agriculture)

The Make it in America Challenge would also accept additional appropriations from Congress, which would likely require new spending. However, as the program is set up, budget outlays would not increase.

Many problems can come out of having the government pay for businesses to re-shore or pay to prevent those firms from leaving the country. Living in Ohio for years, I saw this first hand. Companies were given tax or other deals to stay in the Buckeye State but when the terms expired, the companies responded to incentives and expected an equal or better deal to remain in the state. When the state could’t or refused to comply, the company left for a better business environment (sometimes for better deals, more consistent or lower tax rates, or more competitive labor markets). In other words, the act of giving individual businesses (at times, picking winners & losers) results in unintended consequences that left the state worse off.

Now, potentially expand Ohio’s example to the entire nation. Some companies could not afford to leave for better fiscal pastures (think your local hair stylist or car mechanic) but with e-commerce expanding fast, many corporations would leave or threaten to leave without a government handout. This is not an example of businesses, or even capitalism, being evil. It’s a situation where people seek scarce resources and jump on opportunities. We all do the same thing picking store brand canned goods because of the lower price or use a coupon to get $10 off an oil change.

What would be better is to allow companies to move about freely (domestically or internationally) to encourage greater tax competition and competitiveness across all boarders. That starts with having a freer marketplace. By allowing firms to succeed and fail because of their own choices and workers to have earned success by taking less out of their paychecks, the economy will grow and erase the need for government handouts. Plus, saving $40 million is no small feat.

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The Late Edition: March 27, 2013
Posted By:  - 03/28/13

Today’s Taxpayer News!

Lee Schalk spoke out against the planned $250 million Columbia Pike streetcar system at the Arlington County budget hearing last night. Read more form the Clarendon Patch.

ObamaCare just gets better. According to HuffPo, the law will cause medical claims costs to jump an average of 32% per individual policy.  

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The Late Edition: March 25, 2013
Posted By:  - 03/25/13

Today’s Taxpayer News!

Pete Sepp weighs in on the Budget Control Act and Congress’s seeming inability to stick to meaningful spending reductions in this Townhall piece. 

The Fiscal Times explains some of the budget gimmicks being used to hide true costs to taxpayers in both the House and Senate budgets.

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CPAC 2013, Part 2 (AUDIO): Seton Motley, Nick Dranias discuss Tech & BBA - Speaking of Taxpayers
Posted By:  - 03/24/13

Subscribe to our podcast "Speaking of Taxpayers" via iTunes!


In the final installment of our podcast from the CPAC floor, Seton Motley of Less Government stops by to talk important tech issues, and Nick Dranias updates us on big developments on the Balanced Budget Amendment front! 
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A Bus Stop For the Price of a Bus Terminal
Posted By: Dan Barrett - 03/22/13

I live in Arlington, Virginia, a tiny county that happens to be right next to our nation’s capitol. One of the many reasons I live there is that the state of Virginia seems to have a much better handle on spending and the size of government, especially when compared to neighboring Maryland and Washington DC. So much so that the state had a $220 million surplus back in July. There are other great benefits to living in Arlington including amazing food trucks, access to the Metro system, and Arlington Cemetery. BUT the county seems to want people to be impressed with a piece of nondescript concrete a mere 6 blocks from where I live. It’s a bus stop. It cost $1 million and I’m not the only one who paid for it. You did too.

According to Arlington Now, the county just completed the “Super Stop,” which is the first of 24 such advanced bus pickup points with a shelter for “some 15 passengers, lighting, an electronic display that shows when the next buses are coming, and a number of unbranded newspaper boxes.” It took a year and a half to construct. An Arlington County spokeswoman reported that $575,000 was spent for construction and $440,000 went towards management and inspections. First point: I am not read up on the intricacies of Arlington and Virginia building codes but if just a forth of the latter amount ($110,000) was spent on inspections then this is a serious case of overregulation.

Now to what all of this has to do with you taxpayers across the country. The county paid $200,000 for the glorified street corner and got the remaining $815,000 from the Virginia Department of Transportation, who in turn will get $996.9 million federal funds for road infrastructure projects in FY 2013. Second point: According to Reed Construction Data and their 2008 numbers, it costs an average $1.294 million to construct a basic 12,000 square foot single-story bus terminal using union labor. To clarify, it is conceivable that Arlington County could have built a terminal with the costs of this single bus stop. I estimate that the bus stop is around 180 square feet but, even if it was double that (360 sq ft), they spent $2,828 per square foot.

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