Securing the Nation’s Fiscal Future
House Budget, Investing in America's Economic and National Security, February 17, 2019
Senate Budget, The Budget Control Act: A Review of Cap-Adjusted Spending, February 27, 2019
Senate Budget, Fixing a Broken Budget and Spending Process: Securing the Nation’s Fiscal Future, June 26, 2019
We have based these remarks on our previous comments and our response to the final report of the Joint Select Committee on Budget and Appropriations Process Reform. They reflect what I published in my book, Musings from the Christian Left in 2004 and which I transmitted to the House Budget Committee in September of 2011 and June of 2016 and to the Senate Committee in October 2011 and to this Joint Select Committee in July.
The federal budget process is broken. It must be replaced with a new budget process that allows for agreement on broad issues and a continuation of government while the details and controversies at the programmatic level are worked out. The solution must include incentives to keep the process moving.
To achieve compromise earlier, we recommend that a permanent Joint Budget Committee draft the JBR to be enacted by a date certain to avoid reverting to the budget caps. This will provide both expedited process and likely early involvement of the White House, who would release detailed appropriation requests only after the JBR is passed. A two-year budget process is suggested to assure the process is completed on time.
The JBR would trigger automatic appropriations at the beginning of the fiscal year, with detailed appropriation marks at the same proportionate levels as the current services budget. If no JBR is passed, then the marks in the Budget Control Act of 2011 would have the same force, allowing automatic appropriations in the same manner. This tie to the BCA is not meant to be used and it should not be if the Congress operates bipartisanly under effective leadership. If that leadership breaks down, however, the government absolutely must have a backup procedure.
As the Committee knows, the BCA marks were devised to avoid a self-inflicted debt limit crisis and to conform to baseline requirements to fund making the tax cuts in the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003 permanent for all but the richest 2% of households. There was no appetite for making detailed tax and spending fixes that would raise revenue from wealthier taxpayers. A quirk in baseline calculations allowed the prior tax cuts to expire and be reinstated for the bottom 98% under the American Taxpayer Relief Act of 2012. In 2017, the Tax Cut and Jobs Act was passed with no concern for long term balance, which was reinforced by the Balanced Budget Act of 2018. The TCJA expires, in part, in 2025. BBA 2018 expires at the end of this fiscal year.
JSC Co-Chairman Lowery commented in her opening statement on November 15th that the Budget Control Act of 2011 marks are too low and that this leads to the inability to pass appropriations bills.
Automatic appropriations would end this difficulty and spur action by both parties. Because BCA levels are too low, the marks in the Act could be increased by the legislation amending the process itself. These marks should be realistic rather than punitive. Part of any reform must include new caps be set through 2025, when parts of the TCJA expire as well.
As long as the current tax cuts are in force, the money not collected in taxes should be made up with bond sales, else all sorts of mischief occur in the area of asset accumulation and inflation. Such accumulations are not economic growth, they are the manufacture of speculative investment bubbles that always lead back to recessions and depressions. There is no such thing as a business cycle, only rich people who are undertaxed who invest in garbage and then sell it to the public,like any Ponzi scheme.
We are on record predicting that enactment of the Tax and Job Cuts Act (not a typo) will restrict wages and cause other labor cost savings so that executives can cash in on the lower tax rates by earning higher bonuses, so that any economic gains (and growth could come faster) would be from deficit spending. While some companies gave very visible bonuses for the 2017 Christmas holidays, they did not also increase salary levels noticeably. Productivity has made huge gains but wages have not, mostly because employers have a market advantage in the down economy, which is good for CEOs and donors, but bad for the nation.
The tax law was a classic piece of Austrian Economics, where booms are encouraged, busts happen with no bail outs and the strong companies and best workers keep jobs and devil take the hindmost. It is economic Darwinism at its most obvious, but there is a safety valve. When tax cuts pass, Congress loses all fiscal discipline, the Budget Control Act baseline discipline should continue to be suspended and deficits grow. Taxpayers don’t mind because bond purchasers are sure to pick up the slack, which they will as long as we run trade deficits, unless the President’s economic naivete ruins that for us.
We remind the Committee that in the future we face a crisis in net interest on the debt, both from increased rates and growing principle. This growth will only feasible until either China or the European Union develop tradable debt instruments backed by income taxation, which is the secret to the ability of the United States to be the world’s bond issuer. At some point, however, we need incentives to pay down the debt.
The national debt is possible because of progressive income taxation. The liability for repayment, therefore, is a function of that tax. For every dollar you pay in taxes, you owe $13 in debt.. People who pay nothing owe nothing. People who pay tens of thousands of dollars a year owe hundreds of thousands.
The answer is not making the poor pay more or giving them less benefits, either only slows the economy. Rich people must pay more and do it faster. My child is becoming a social worker, although she was going to be an artist. Don’t look to her to pay off the debt. Your children and grandchildren and those of your donors are the ones on the hook unless their parents step up and pay more. How’s that for incentive to raise taxes?
We should do so sooner rather than later. This should be possible when the realignment that began last November is completed in 2020 (if not sooner). At that point, taxes should go up to a level that will allow any new spending baseline adjustments to be made permanent.
Senate Budget, The Budget Control Act: A Review of Cap-Adjusted Spending, February 27, 2019
Senate Budget, Fixing a Broken Budget and Spending Process: Securing the Nation’s Fiscal Future, June 26, 2019
We have based these remarks on our previous comments and our response to the final report of the Joint Select Committee on Budget and Appropriations Process Reform. They reflect what I published in my book, Musings from the Christian Left in 2004 and which I transmitted to the House Budget Committee in September of 2011 and June of 2016 and to the Senate Committee in October 2011 and to this Joint Select Committee in July.
The federal budget process is broken. It must be replaced with a new budget process that allows for agreement on broad issues and a continuation of government while the details and controversies at the programmatic level are worked out. The solution must include incentives to keep the process moving.
To achieve compromise earlier, we recommend that a permanent Joint Budget Committee draft the JBR to be enacted by a date certain to avoid reverting to the budget caps. This will provide both expedited process and likely early involvement of the White House, who would release detailed appropriation requests only after the JBR is passed. A two-year budget process is suggested to assure the process is completed on time.
The JBR would trigger automatic appropriations at the beginning of the fiscal year, with detailed appropriation marks at the same proportionate levels as the current services budget. If no JBR is passed, then the marks in the Budget Control Act of 2011 would have the same force, allowing automatic appropriations in the same manner. This tie to the BCA is not meant to be used and it should not be if the Congress operates bipartisanly under effective leadership. If that leadership breaks down, however, the government absolutely must have a backup procedure.
As the Committee knows, the BCA marks were devised to avoid a self-inflicted debt limit crisis and to conform to baseline requirements to fund making the tax cuts in the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003 permanent for all but the richest 2% of households. There was no appetite for making detailed tax and spending fixes that would raise revenue from wealthier taxpayers. A quirk in baseline calculations allowed the prior tax cuts to expire and be reinstated for the bottom 98% under the American Taxpayer Relief Act of 2012. In 2017, the Tax Cut and Jobs Act was passed with no concern for long term balance, which was reinforced by the Balanced Budget Act of 2018. The TCJA expires, in part, in 2025. BBA 2018 expires at the end of this fiscal year.
JSC Co-Chairman Lowery commented in her opening statement on November 15th that the Budget Control Act of 2011 marks are too low and that this leads to the inability to pass appropriations bills.
Automatic appropriations would end this difficulty and spur action by both parties. Because BCA levels are too low, the marks in the Act could be increased by the legislation amending the process itself. These marks should be realistic rather than punitive. Part of any reform must include new caps be set through 2025, when parts of the TCJA expire as well.
As long as the current tax cuts are in force, the money not collected in taxes should be made up with bond sales, else all sorts of mischief occur in the area of asset accumulation and inflation. Such accumulations are not economic growth, they are the manufacture of speculative investment bubbles that always lead back to recessions and depressions. There is no such thing as a business cycle, only rich people who are undertaxed who invest in garbage and then sell it to the public,like any Ponzi scheme.
We are on record predicting that enactment of the Tax and Job Cuts Act (not a typo) will restrict wages and cause other labor cost savings so that executives can cash in on the lower tax rates by earning higher bonuses, so that any economic gains (and growth could come faster) would be from deficit spending. While some companies gave very visible bonuses for the 2017 Christmas holidays, they did not also increase salary levels noticeably. Productivity has made huge gains but wages have not, mostly because employers have a market advantage in the down economy, which is good for CEOs and donors, but bad for the nation.
The tax law was a classic piece of Austrian Economics, where booms are encouraged, busts happen with no bail outs and the strong companies and best workers keep jobs and devil take the hindmost. It is economic Darwinism at its most obvious, but there is a safety valve. When tax cuts pass, Congress loses all fiscal discipline, the Budget Control Act baseline discipline should continue to be suspended and deficits grow. Taxpayers don’t mind because bond purchasers are sure to pick up the slack, which they will as long as we run trade deficits, unless the President’s economic naivete ruins that for us.
We remind the Committee that in the future we face a crisis in net interest on the debt, both from increased rates and growing principle. This growth will only feasible until either China or the European Union develop tradable debt instruments backed by income taxation, which is the secret to the ability of the United States to be the world’s bond issuer. At some point, however, we need incentives to pay down the debt.
The national debt is possible because of progressive income taxation. The liability for repayment, therefore, is a function of that tax. For every dollar you pay in taxes, you owe $13 in debt.. People who pay nothing owe nothing. People who pay tens of thousands of dollars a year owe hundreds of thousands.
The answer is not making the poor pay more or giving them less benefits, either only slows the economy. Rich people must pay more and do it faster. My child is becoming a social worker, although she was going to be an artist. Don’t look to her to pay off the debt. Your children and grandchildren and those of your donors are the ones on the hook unless their parents step up and pay more. How’s that for incentive to raise taxes?
We should do so sooner rather than later. This should be possible when the realignment that began last November is completed in 2020 (if not sooner). At that point, taxes should go up to a level that will allow any new spending baseline adjustments to be made permanent.
posted by Michael Bindner at 2:30 PM
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