To contact us Click HERE
April 4th 2005 - The tightly disciplined, Republican-controlled Congress that gave President George W. Bush key pro- business victories in the first few months of his second term may now put political survival ahead of party unity.
Bush has outlined an aggressive agenda -- including restructuring Social Security, cutting a record budget deficit and easing immigration policies -- that he hopes will secure his legacy for posterity. His party's lawmakers have a simpler goal: winning re-election and maintaining or enlarging their House and Senate majorities in 2006.
``Bush sees himself as a consequential president in history who accomplished big things,'' says Bill McInturff, a Republican pollster. ``Most members of Congress can be very happy just strolling along saying, 'Here is all the money I delivered to my district.'''
Congressional Republicans are pushing for legislation to allow drug imports from Canada, a measure opposed by Bush and drug makers such as Pfizer Inc. and Merck & Co. Bush also faces resistance on his plan to ease immigration laws, which food- service companies such as Outback Steakhouse Inc. and Wendy's International Inc. support. And Wall Street analysts and economists hoping for measures to restrain the budget deficit are concerned that lawmakers facing re-election won't be inclined to cut spending.
``There are some great challenges,'' White House spokesman Trent Duffy says. ``This president is a big-game hunter. The process is just beginning.''
The Republicans, who gained expanded majorities in both chambers of Congress in the November elections, gave Bush some early successes this year with measures that curbed class-action lawsuits, rewrote bankruptcy laws and paved the way for oil drilling in Alaska's Arctic National Wildlife Refuge.
Easy Wins
These ``were easy wins that were left over from the last Congress,'' says Ethan Siegal, president of the Washington Exchange, which tracks policy for institutional investors. ``Everything else Bush has on the table is very difficult, and the discipline in his party is breaking apart.''
The first stirrings of dissent were heard when lawmakers took up Bush's 2006 budget, which calls for trimming federal benefits and other domestic programs while extending portions of his first-term tax cuts.
Last month, Senator Gordon Smith, an Oregon Republican, led six other Republicans in blocking Bush's plan to cut $14 billion from the Medicaid health program over five years. And when a Senate committee approved Bush's $284 billion highway bill, Senator James Inhofe of Oklahoma assured his fellow Republicans that the funding may be increased later.
Drug Imports
Republicans are also at odds with Bush's position on allowing Americans to import cheaper drugs from Canada. Senator Charles Grassley of Iowa, the powerful chairman of the Finance Committee, is pushing for legislation that would allow the imports, which Bush and drug makers oppose.
Representative Jo Ann Emerson, a Missouri Republican, says she is confident the bill allowing imports can clear the House. Lawmakers' ``constituents are saying, find any means possible to bring down the cost of drugs,'' she says.
Drug makers such as New York-based Pfizer, Whitehouse Station, New Jersey-based Merck and Madison, New Jersey-based Wyeth say the measure won't adequately address these concerns. ``We don't believe that re-importation is a solution to the problems of access and affordability of medications,'' Wyeth spokeswoman Natalie De Vane says. ``And it does pose a safety risk.''
Bush's call for a guest-worker visa program aimed at allowing migrants to fill low-skilled jobs may be the toughest to pass, because so many Republicans are opposed to it, says Bruce Josten, the head lobbyist at the U.S. Chamber of Commerce in Washington.
Opening Floodgates
Representative John Hostettler, an Indiana Republican who heads the House Judiciary Subcommittee on Immigration, said he wouldn't allow any bill easing immigration to be brought before his panel for a vote. ``It is my concern and others' concerns that if you legalize those who have illegally obtained residency here, you will open the floodgates,'' he said in an interview March 31.
The National Restaurant Association, which represents companies such as Tampa, Florida-based Outback Steakhouse and Dublin, Ohio-based Wendy's International, backs Bush's plan. The food-service industry is the largest U.S. employer of undocumented workers -- about 1.4 million of the nation's 8 million immigrants.
Second-Term Blues
These kinds of defections are common in a president's second term, particularly when his party is in power in Congress, says Stephen Wayne, a government professor at Georgetown University in Washington. In four of five second-term mid-term elections since World War II, the party that controlled the White House has lost seats in both chambers, says Jennifer Duffy, an analyst at the Cook Political Report, which tracks political races.
Most lawmakers are aware of this phenomenon, called the ``sixth-year itch,'' Duffy says, and Republicans will cast their votes on Bush's agenda items with this precedent in mind. ``It's a self-preservation issue,'' she says.
There are 15 Republican-held Senate seats on the ballot next year. In the House, where all members are up for re-election, 24 Republicans won their 2004 elections with 55 percent of the vote or less.
This dynamic is already evident in the voting behavior of Senator Rick Santorum of Pennsylvania, the No. 3 Senate Republican leader, who is expected to face a tough re-election contest in 2006 from Democrat Robert Casey Jr., the state treasurer.
Good for Pennsylvania
Santorum has parted ways with the president at least twice in the last month. He proposed a $1.10-an-hour increase to the $5.15-an-hour minimum wage, and voted in favor of an amendment to a 2006 budget plan that rejected Bush's call to cut nearly $2 billion from the Community Development Block Grant program and other economic development programs that are popular in his state.
``You're going to see him deviate on things that make sense for Pennsylvania,'' Duffy says.
Perhaps most significant for Bush's legacy, his plan to establish private Social Security accounts has failed to generate a critical mass of support. The proposal has proved unpopular in the polls, and Republican lawmakers including Representative Jim Nussle of Iowa and Representative John Mica of Florida have not made commitments to support it.
Wall Street Worries
Some Republicans share Wall Street's concern over the effect of the proposal on the budget deficit, which reached a record $412 billion last year. Any plan to create the accounts would add $1 trillion to $2 trillion to the deficit over the next 10 years, according to the Congressional Budget Office.
``The longer we continue to allow the public debt to rise, the more painful the ultimate cuts will be,'' says Lou Crandall, chief economist at Wrightson ICAP LLP, a research firm in Jersey City, New Jersey, that analyzes the effects of federal economic policies.
For many Republicans, though, concern about the deficit is mitigated by the desire to avoid the political pain that spending cuts or moderating Bush's tax cuts would entail.
During last month's Senate debate on Bush's request to extend his $1.85 trillion in tax cuts, only five Republican senators joined the chamber's 44 Democrats and one independent to demand that further reductions be offset by tax increases or spending cuts. While the Senate rejected, 50-50, an amendment to the fiscal blueprint requiring offsets, some Republicans plan to fight again this summer when party leaders advance the legislation.
28 Eylül 2012 Cuma
Deficit cracking GOP's solidarity
To contact us Click HERE
November 27th 2005 - More than a decade after the Republican Revolution, when Newt Gingrich became House speaker on the promise to downsize government, Republicans are facing another revolution.
This one is from within.
When Congress returns next month from its Thanksgiving recess, Republican leaders who have never failed to marshal their forces on big party-line votes face the prospect of defeat on tax cuts and spending restraint -- the core issues that have united the party since President Ronald Reagan and gave them their House majority in 1994.
They have lost some tax and spending votes already, and postponed others because of the specter of losing. After a five-year spending spree on everything from the Iraq war to Medicare, deficits are now jeopardizing the tax cuts that were the centerpiece of President Bush's first term.
A move to preserve tax cuts on capital gains and dividends -- the gemstone of the Bush tax cuts for conservatives -- is in trouble in both the House and the Senate. For the first time since George W. Bush took office, House Democrats are united against tax cuts, and Republican moderates are bucking their party leadership.
GOP leaders are pushing a measure to control entitlement spending by shaving Medicaid and food stamps for the poor. But the combination of investor tax cuts and reductions in poverty programs has already led to a series of embarrassing defeats in committee and on the House floor. Republicans are headed for a pre-Christmas showdown that could turn into a political disaster.
Hurricane topples plans
Hurricane Katrina last summer was a tipping point. The storm forced Republicans to ditch the estate tax repeal because it was deemed unseemly to end a wealth tax after poor people had lost their homes. Sensing a public relations disaster, Republican leaders also postponed extending the investor tax cuts until the end of the year.
Congress quickly passed $62 billion in emergency disaster relief. But Bush's promise to "do whatever it takes" to rebuild the Gulf Coast set off a rebellion among conservatives, who demanded spending cuts to pay the bill.
"I think they blinked after Hurricane Katrina," said Brad Woodhouse, a liberal activist who helped defeat Bush's Social Security overhaul and has turned his fire on the Republican budget, heading a liberal alliance called the Emergency Campaign for American Priorities.
"It was such an acknowledgment of how inappropriate these spending cuts to finance tax cuts are," Woodhouse said. "It was like blood dripping in the water for us."
The budget outlook -- and the problems facing the GOP -- promise to get much worse. Medicare's costly new prescription drug benefit, an $18 trillion unfunded liability sponsored by the White House and Republican leadership, starts in January. Just two years from now, in 2008, the enormous Baby Boom generation will begin retiring, ceasing income tax payments and starting to collect benefits, leading to a budget squeeze unprecedented in U.S. history.
"We're seeing the future," said Bruce Bartlett, a former Treasury official in the George H.W. Bush administration and tax-cut advocate. "The decisions that have been made over the last five years have resulted in the chickens coming home to roost."
Total spending increases under the current President Bush closely rival those of President Lyndon Johnson, a Democrat famous for conducting the Vietnam War while simultaneously increasing domestic spending.
Discretionary spending rose 48.5 percent in Bush's first term, according to an analysis by the libertarian Cato Institute, twice as much as in two terms under President Bill Clinton, when spending rose 21.6 percent. Adjusted for inflation, Bush has increased total spending at an annualized rate of 5.6 percent, compared with 1.5 percent under Clinton.
"It's only a matter of time before we stop talking about cutting taxes for a very long period of time and talk basically about increasing taxes," Bartlett predicted. "The end of the era of tax cutting is going to put tremendous strain on the Republican coalition, just as the end of the era of big spending put tremendous strain on the Democratic coalition" in the 1980s. "You're hearing more and more people on the Republican side talking about major losses in the congressional elections next year and about 2008 being a really, really bad year for Republicans."
In the two months since Republicans pulled their tax cut bills, the atmosphere has only gotten worse. Republicans lost two important off-year gubernatorial elections in Virginia and New Jersey. Bush's popularity has hit new lows, with the public now decidedly opposing the Iraq war. Leading GOP candidates, including Sen. Rick Santorum, a conservative member of the Senate leadership who faces a tough re-election fight in Pennsylvania, have refused to appear with Bush at campaign events.
"Republican members of Congress recognize that the president can't help them very much any more," said Cato Institute Chairman Bill Niskanen, a former Reagan administration economist. In addition, the indictment of former House Majority Leader Tom DeLay seriously weakened party discipline in the House and exposed deep divisions between fiscal conservatives and moderates.
"There is a substantial ideological split, particularly among House Republicans, on fiscal responsibility," Niskanen said. "A lot of them have gone along with a high rate of growth of spending but have done so without any enthusiasm."
As the post-Katrina conservative revolt gelled, the Republican leadership turned to Medicaid, food stamps and student loans for spending restraint. The Senate is proposing $35 billion in reductions and the House $50 billion; both chambers are also seeking between $56 billion and $59 billion in tax cuts.
Large gap to cross
There are enormous differences between the House and Senate on both measures. Reconciling them will be very difficult in the two weeks Congress has left before adjourning for Christmas.
Combined, the measures increase the deficit. The spending restraint appeased conservatives but provoked an outcry from Democrats and GOP moderates. Efforts to console moderates by dropping a measure for oil exploration in the Arctic National Wildlife Refuge and adding subsidies for home heating costs and dairy farmers have done little but stoke more controversy.
The Medicaid and food stamp cuts have attracted the most fire, and barely passed the House 217-215 before Thanksgiving, with no Democratic support. Republicans recessed before attempting to pass the tax cuts.
Much of the roughly $11 billion in cuts over five years proposed by the Senate for Medicaid, a health care program for the poor that many elderly use to pay nursing home costs, were recommended by state governors. They contend the program is becoming burdensome for the states, which must come up with money to match federal funding. Democrats have portrayed the reduction in the growth of Medicaid spending as dire, but even liberal analysts concede they are not severe. One provision would increase co-payments from $3 to $5, and another would allow elderly nursing home residents to shield $750,000 in home equity, raised from $500,000 after Republican moderates objected.
The cuts are "not awful," said Jason Furman, a former adviser to Democratic presidential candidate John Kerry now at the liberal Center for Budget and Policy Priorities.
"It's less about the magnitude and more about why should you be asking poor people to pay anything more for health care at the same time that you're giving brand-new tax cuts to the most fortunate," Furman said. "That is what is just completely wrong with this picture.
"A go-it-alone Republican strategy works when you're trying to cut taxes or increase spending, but when you're trying to make tougher choices, the only way to do it is to work together with the other party for shared sacrifice," Furman said. "Budget reality is starting to catch up with the Republican Party."
Heavy U.S. borrowing with much more on the horizon is stoking concern about a potential financial crisis. Any one of several big economic imbalances -- including looming pressures on the federal budget, the zero U.S. savings rate, the historically high trade deficit, a real estate boom that has supported consumer spending -- could provoke a sudden financial shift, economists say.
"It's not unrealistic to think that if we continue to delay -- and the Baby Boomers do start to retire as early as 2008 -- that sooner or later the lenders to this country may decide it's not the best place to park all their savings," said Maya MacGuineas, director of fiscal policy for centrist New American Foundation.
Bartlett warns of a "financial Katrina."
"It's just a matter of time before we have some kind of economic event that I think is just going to change the political situation 180 degrees and make deficit reduction the order of the day," he said. "I don't know what it will be. I just know that when you've got gasoline spilling onto the floor of your house, it doesn't really matter where the spark comes from."
This one is from within.
When Congress returns next month from its Thanksgiving recess, Republican leaders who have never failed to marshal their forces on big party-line votes face the prospect of defeat on tax cuts and spending restraint -- the core issues that have united the party since President Ronald Reagan and gave them their House majority in 1994.
They have lost some tax and spending votes already, and postponed others because of the specter of losing. After a five-year spending spree on everything from the Iraq war to Medicare, deficits are now jeopardizing the tax cuts that were the centerpiece of President Bush's first term.
A move to preserve tax cuts on capital gains and dividends -- the gemstone of the Bush tax cuts for conservatives -- is in trouble in both the House and the Senate. For the first time since George W. Bush took office, House Democrats are united against tax cuts, and Republican moderates are bucking their party leadership.
GOP leaders are pushing a measure to control entitlement spending by shaving Medicaid and food stamps for the poor. But the combination of investor tax cuts and reductions in poverty programs has already led to a series of embarrassing defeats in committee and on the House floor. Republicans are headed for a pre-Christmas showdown that could turn into a political disaster.
Hurricane topples plans
Hurricane Katrina last summer was a tipping point. The storm forced Republicans to ditch the estate tax repeal because it was deemed unseemly to end a wealth tax after poor people had lost their homes. Sensing a public relations disaster, Republican leaders also postponed extending the investor tax cuts until the end of the year.
Congress quickly passed $62 billion in emergency disaster relief. But Bush's promise to "do whatever it takes" to rebuild the Gulf Coast set off a rebellion among conservatives, who demanded spending cuts to pay the bill.
"I think they blinked after Hurricane Katrina," said Brad Woodhouse, a liberal activist who helped defeat Bush's Social Security overhaul and has turned his fire on the Republican budget, heading a liberal alliance called the Emergency Campaign for American Priorities.
"It was such an acknowledgment of how inappropriate these spending cuts to finance tax cuts are," Woodhouse said. "It was like blood dripping in the water for us."
The budget outlook -- and the problems facing the GOP -- promise to get much worse. Medicare's costly new prescription drug benefit, an $18 trillion unfunded liability sponsored by the White House and Republican leadership, starts in January. Just two years from now, in 2008, the enormous Baby Boom generation will begin retiring, ceasing income tax payments and starting to collect benefits, leading to a budget squeeze unprecedented in U.S. history.
"We're seeing the future," said Bruce Bartlett, a former Treasury official in the George H.W. Bush administration and tax-cut advocate. "The decisions that have been made over the last five years have resulted in the chickens coming home to roost."
Total spending increases under the current President Bush closely rival those of President Lyndon Johnson, a Democrat famous for conducting the Vietnam War while simultaneously increasing domestic spending.
Discretionary spending rose 48.5 percent in Bush's first term, according to an analysis by the libertarian Cato Institute, twice as much as in two terms under President Bill Clinton, when spending rose 21.6 percent. Adjusted for inflation, Bush has increased total spending at an annualized rate of 5.6 percent, compared with 1.5 percent under Clinton.
"It's only a matter of time before we stop talking about cutting taxes for a very long period of time and talk basically about increasing taxes," Bartlett predicted. "The end of the era of tax cutting is going to put tremendous strain on the Republican coalition, just as the end of the era of big spending put tremendous strain on the Democratic coalition" in the 1980s. "You're hearing more and more people on the Republican side talking about major losses in the congressional elections next year and about 2008 being a really, really bad year for Republicans."
In the two months since Republicans pulled their tax cut bills, the atmosphere has only gotten worse. Republicans lost two important off-year gubernatorial elections in Virginia and New Jersey. Bush's popularity has hit new lows, with the public now decidedly opposing the Iraq war. Leading GOP candidates, including Sen. Rick Santorum, a conservative member of the Senate leadership who faces a tough re-election fight in Pennsylvania, have refused to appear with Bush at campaign events.
"Republican members of Congress recognize that the president can't help them very much any more," said Cato Institute Chairman Bill Niskanen, a former Reagan administration economist. In addition, the indictment of former House Majority Leader Tom DeLay seriously weakened party discipline in the House and exposed deep divisions between fiscal conservatives and moderates.
"There is a substantial ideological split, particularly among House Republicans, on fiscal responsibility," Niskanen said. "A lot of them have gone along with a high rate of growth of spending but have done so without any enthusiasm."
As the post-Katrina conservative revolt gelled, the Republican leadership turned to Medicaid, food stamps and student loans for spending restraint. The Senate is proposing $35 billion in reductions and the House $50 billion; both chambers are also seeking between $56 billion and $59 billion in tax cuts.
Large gap to cross
There are enormous differences between the House and Senate on both measures. Reconciling them will be very difficult in the two weeks Congress has left before adjourning for Christmas.
Combined, the measures increase the deficit. The spending restraint appeased conservatives but provoked an outcry from Democrats and GOP moderates. Efforts to console moderates by dropping a measure for oil exploration in the Arctic National Wildlife Refuge and adding subsidies for home heating costs and dairy farmers have done little but stoke more controversy.
The Medicaid and food stamp cuts have attracted the most fire, and barely passed the House 217-215 before Thanksgiving, with no Democratic support. Republicans recessed before attempting to pass the tax cuts.
Much of the roughly $11 billion in cuts over five years proposed by the Senate for Medicaid, a health care program for the poor that many elderly use to pay nursing home costs, were recommended by state governors. They contend the program is becoming burdensome for the states, which must come up with money to match federal funding. Democrats have portrayed the reduction in the growth of Medicaid spending as dire, but even liberal analysts concede they are not severe. One provision would increase co-payments from $3 to $5, and another would allow elderly nursing home residents to shield $750,000 in home equity, raised from $500,000 after Republican moderates objected.
The cuts are "not awful," said Jason Furman, a former adviser to Democratic presidential candidate John Kerry now at the liberal Center for Budget and Policy Priorities.
"It's less about the magnitude and more about why should you be asking poor people to pay anything more for health care at the same time that you're giving brand-new tax cuts to the most fortunate," Furman said. "That is what is just completely wrong with this picture.
"A go-it-alone Republican strategy works when you're trying to cut taxes or increase spending, but when you're trying to make tougher choices, the only way to do it is to work together with the other party for shared sacrifice," Furman said. "Budget reality is starting to catch up with the Republican Party."
Heavy U.S. borrowing with much more on the horizon is stoking concern about a potential financial crisis. Any one of several big economic imbalances -- including looming pressures on the federal budget, the zero U.S. savings rate, the historically high trade deficit, a real estate boom that has supported consumer spending -- could provoke a sudden financial shift, economists say.
"It's not unrealistic to think that if we continue to delay -- and the Baby Boomers do start to retire as early as 2008 -- that sooner or later the lenders to this country may decide it's not the best place to park all their savings," said Maya MacGuineas, director of fiscal policy for centrist New American Foundation.
Bartlett warns of a "financial Katrina."
"It's just a matter of time before we have some kind of economic event that I think is just going to change the political situation 180 degrees and make deficit reduction the order of the day," he said. "I don't know what it will be. I just know that when you've got gasoline spilling onto the floor of your house, it doesn't really matter where the spark comes from."
Bush's Budget Sparks Bipartisan Protest
To contact us Click HERE
February 7th 2006 - The administration defended President Bush's $2.77 trillion budget plan on Tuesday against congressional attacks that the cuts it sought to deal with exploding budget deficits would unfairly harm government efforts in education, health care and farm programs.
Treasury Secretary John Snow, among leadoff witnesses in a series of congressional hearings, said the administration had made the tough choices to fund programs that were working and eliminate those that were not.
"This budget represents the president's dedication to fiscal discipline, an efficient federal government and the continuation of a thriving U.S. economy," Snow told the Senate Finance Committee.
But critics noted that the deficit for the current budget year would rise to an all-time high of $423 billion and they questioned Bush's projections for declining deficits in future years.
Democrats said Bush's proposed budget for Fiscal 2007, beginning Oct. 1, was seriously understating spending that will be needed to fight wars in Iraq and Afghanistan and did not include the billions of dollars needed in future years to make sure the alternative minimum tax designed for the wealthy does not pinch more and more middle class taxpayers.
Sen. Max Baucus, D-Mont., said the explosion of federal deficits was adding to the national debt, requiring the administration to come to Congress in the next few weeks to raise the $8.18 trillion debt ceiling. He said all of that debt is being financed more and more by foreigners.
"America is borrowing 80 percent of the world's annual savings. We are handing our children and our children's children a set of obligations they will owe to foreign central banks," Baucus told Snow.
Sen. Kent Conrad, D-N.D., produced charts showing that the amount of federal government debt held by foreigners before Bush became president totaled $1 trillion and now in the first five years of his administration has more than doubled.
Snow said the ability of the United States to pay interest on the debt was a function of the economy's size and the vitality of the nation's bond markets.
"There is no doubt given the deep and liquid capital markets of the United States, that we will continue to attract capital from investors around the world," the Treasury secretary told the committee.
Testifying separately before the Senate Armed Services Committee, Defense Secretary Donald H. Rumsfeld said the military must continue to change in order to defend against terrorists who could get a nuclear weapon or launch a biological attack.
"No nation, no matter how powerful, has the resources or capability to defend everywhere, at every time, against every conceivable type of attack," Rumsfeld said. "The only way to protect the American people, therefore, is to provide our military with as wide a range of capabilities, rather than preparing to confront any one particular threat.
Bush's budget, which was sent to Congress on Monday, has faced predictable criticism from Democrats but it is also facing attacks from Republicans.
Sen. Arlen Specter, R-Pa., called Bush's proposed cuts in education and health "scandalous" while Sen. Olympia Snowe, R-Maine, said she was "disappointed and even surprised" at the extent of the administration's proposed cuts in Medicaid and Medicare.
Bush's spending blueprint for the 2007 budget year that begins Oct. 1 would provide large increases for the military and homeland security but would trim spending in the one-sixth of the budget that covers the rest of discretionary spending. Nine Cabinet agencies would see outright reductions with the biggest percentage cuts occurring in the departments of Transportation, Justice and Agriculture.
And in mandatory programs _ so-called because the government must provide benefits to all who qualify _ the president is seeking over the next five years savings of $36 billion in Medicare, $5 billion in farm subsidy programs, $4.9 billion in Medicaid support for poor children's health care and $16.7 billion in additional payments from companies to shore up the government's besieged pension benefit agency.
Senate Finance Committee Chairman Charles Grassley noted that Congress has just completed a yearlong battle to achieve far smaller savings in Medicaid and Medicare and "any more reductions of a significant scope could be difficult this year."
Bush's budget would meet his twin goals of making permanent his first-term tax cuts, which are set to expire by 2010, and cutting the deficit in half by 2009, the year he leaves office.
Democrats, hoping to wrest control of Congress from the Republicans in this year's election, charged that Bush was forced into an austere spending plan because of the estimated $1.35 trillion over the next decade that it will cost to extend his first-term tax cuts, which Democrats claim primarily benefit the very wealthy.
In addition to strict limits on most discretionary, non-security spending in the budget, Bush sought drastic cuts or total elimination on 141 programs that would produce savings of nearly $15 billion in 2007.
The targeted programs included 42 in the area of education ranging from drug-free schools to federal support for the arts, technology and parent-resource centers.
Even previously favored agencies such as the National Institutes of Health were not immune from the budget knife with overall funding essentially frozen and many individual programs seeing budget cuts. That brought objections from groups ranging from the American Heart Association to the American Diabetes Association.
Bush's budget submission is just the opening round in what opponents are promising will be a spirited fight in Congress over spending priorities.
"The president's budget slashes resources for exactly the priorities we should be supporting _ groundbreaking medical research, health care for our seniors, and education for our kids," said Sen. Tom Harkin, D-Iowa.
Treasury Secretary John Snow, among leadoff witnesses in a series of congressional hearings, said the administration had made the tough choices to fund programs that were working and eliminate those that were not.
"This budget represents the president's dedication to fiscal discipline, an efficient federal government and the continuation of a thriving U.S. economy," Snow told the Senate Finance Committee.
But critics noted that the deficit for the current budget year would rise to an all-time high of $423 billion and they questioned Bush's projections for declining deficits in future years.
Democrats said Bush's proposed budget for Fiscal 2007, beginning Oct. 1, was seriously understating spending that will be needed to fight wars in Iraq and Afghanistan and did not include the billions of dollars needed in future years to make sure the alternative minimum tax designed for the wealthy does not pinch more and more middle class taxpayers.
Sen. Max Baucus, D-Mont., said the explosion of federal deficits was adding to the national debt, requiring the administration to come to Congress in the next few weeks to raise the $8.18 trillion debt ceiling. He said all of that debt is being financed more and more by foreigners.
"America is borrowing 80 percent of the world's annual savings. We are handing our children and our children's children a set of obligations they will owe to foreign central banks," Baucus told Snow.
Sen. Kent Conrad, D-N.D., produced charts showing that the amount of federal government debt held by foreigners before Bush became president totaled $1 trillion and now in the first five years of his administration has more than doubled.
Snow said the ability of the United States to pay interest on the debt was a function of the economy's size and the vitality of the nation's bond markets.
"There is no doubt given the deep and liquid capital markets of the United States, that we will continue to attract capital from investors around the world," the Treasury secretary told the committee.
Testifying separately before the Senate Armed Services Committee, Defense Secretary Donald H. Rumsfeld said the military must continue to change in order to defend against terrorists who could get a nuclear weapon or launch a biological attack.
"No nation, no matter how powerful, has the resources or capability to defend everywhere, at every time, against every conceivable type of attack," Rumsfeld said. "The only way to protect the American people, therefore, is to provide our military with as wide a range of capabilities, rather than preparing to confront any one particular threat.
Bush's budget, which was sent to Congress on Monday, has faced predictable criticism from Democrats but it is also facing attacks from Republicans.
Sen. Arlen Specter, R-Pa., called Bush's proposed cuts in education and health "scandalous" while Sen. Olympia Snowe, R-Maine, said she was "disappointed and even surprised" at the extent of the administration's proposed cuts in Medicaid and Medicare.
Bush's spending blueprint for the 2007 budget year that begins Oct. 1 would provide large increases for the military and homeland security but would trim spending in the one-sixth of the budget that covers the rest of discretionary spending. Nine Cabinet agencies would see outright reductions with the biggest percentage cuts occurring in the departments of Transportation, Justice and Agriculture.
And in mandatory programs _ so-called because the government must provide benefits to all who qualify _ the president is seeking over the next five years savings of $36 billion in Medicare, $5 billion in farm subsidy programs, $4.9 billion in Medicaid support for poor children's health care and $16.7 billion in additional payments from companies to shore up the government's besieged pension benefit agency.
Senate Finance Committee Chairman Charles Grassley noted that Congress has just completed a yearlong battle to achieve far smaller savings in Medicaid and Medicare and "any more reductions of a significant scope could be difficult this year."
Bush's budget would meet his twin goals of making permanent his first-term tax cuts, which are set to expire by 2010, and cutting the deficit in half by 2009, the year he leaves office.
Democrats, hoping to wrest control of Congress from the Republicans in this year's election, charged that Bush was forced into an austere spending plan because of the estimated $1.35 trillion over the next decade that it will cost to extend his first-term tax cuts, which Democrats claim primarily benefit the very wealthy.
In addition to strict limits on most discretionary, non-security spending in the budget, Bush sought drastic cuts or total elimination on 141 programs that would produce savings of nearly $15 billion in 2007.
The targeted programs included 42 in the area of education ranging from drug-free schools to federal support for the arts, technology and parent-resource centers.
Even previously favored agencies such as the National Institutes of Health were not immune from the budget knife with overall funding essentially frozen and many individual programs seeing budget cuts. That brought objections from groups ranging from the American Heart Association to the American Diabetes Association.
Bush's budget submission is just the opening round in what opponents are promising will be a spirited fight in Congress over spending priorities.
"The president's budget slashes resources for exactly the priorities we should be supporting _ groundbreaking medical research, health care for our seniors, and education for our kids," said Sen. Tom Harkin, D-Iowa.
Bush's Legacy: Debt
To contact us Click HERE
September 25th 2008
UNITED STATES - The Bush legacy is going to include a nasty four-letter word: debt.
On second thought, make that staggering, long-term debt, perhaps in excess of $11 trillion, that will tie the hands of the next president and Congress, to say nothing of imposing a crushing burden on taxpayers.
Just a few months ago, the Iraq war looked like the biggest thing in the eight-year era of the second President Bush, during which his party controlled Congress for six years.
Just a couple of Sunday mornings ago, Bob Woodward of the Washington Post said on national television that the war in Iraq “is probably the most important thing going on right now,” adding that in January the war in Iraq will be topic one in the next administration, and topic two will be the war in Afghanistan.
Now the country suddenly is facing a financial crisis fraught with the possibility of unprecedented economic disaster.
If that isn’t enough to make you reach for the antacid tablets, the president still has about three months left in office, plenty of time for yet another calamitous turn of events.
The national debt was about $5.7 trillion when Bush took office in January 2001. Today, after almost eight years and a couple of wars, the debt has risen to about $9.7 trillion.
And, by the way, that figure might rise another $1 trillion or so before Bush steps down on Jan. 20.
The national debt ceiling today is $10.6 trillion. Treasury Secretary Henry Paulson wants Congress to raise that to $11.3 trillion to clear the decks for massive borrowing to deal with the nation’s financial crisis.
A national debt of $11.3 trillion would come to more than $37,000 each for every man, woman and child in the United States.
And all this comes during an era of allegedly conservative, fiscally responsible Republican domination in Washington.
UNITED STATES - The Bush legacy is going to include a nasty four-letter word: debt.
On second thought, make that staggering, long-term debt, perhaps in excess of $11 trillion, that will tie the hands of the next president and Congress, to say nothing of imposing a crushing burden on taxpayers.
Just a few months ago, the Iraq war looked like the biggest thing in the eight-year era of the second President Bush, during which his party controlled Congress for six years.
Just a couple of Sunday mornings ago, Bob Woodward of the Washington Post said on national television that the war in Iraq “is probably the most important thing going on right now,” adding that in January the war in Iraq will be topic one in the next administration, and topic two will be the war in Afghanistan.
Now the country suddenly is facing a financial crisis fraught with the possibility of unprecedented economic disaster.
If that isn’t enough to make you reach for the antacid tablets, the president still has about three months left in office, plenty of time for yet another calamitous turn of events.
The national debt was about $5.7 trillion when Bush took office in January 2001. Today, after almost eight years and a couple of wars, the debt has risen to about $9.7 trillion.
And, by the way, that figure might rise another $1 trillion or so before Bush steps down on Jan. 20.
The national debt ceiling today is $10.6 trillion. Treasury Secretary Henry Paulson wants Congress to raise that to $11.3 trillion to clear the decks for massive borrowing to deal with the nation’s financial crisis.
A national debt of $11.3 trillion would come to more than $37,000 each for every man, woman and child in the United States.
And all this comes during an era of allegedly conservative, fiscally responsible Republican domination in Washington.
Obama's Achilles Heel: China
To contact us Click HERE
UNITED STATES - The US National Debt continues to go up $3.87 billion USD per day and is currently hovering around $12.4 trillion.
The problem is its going to continue to skyrocket as long as the United States is fighting off a recession, two wars and high oil prices. US President Barack Obama thus has his work cut out for him, problems left behind by George W. Bush, and his problems are quantified by the statement that "Most Americans don't buy American, they buy Chinese."
That is peanuts when you realize the USA only exports an average of $65 billion to China annually. The end result is an annual trade deficit of $235 billion taken out of the American economy and bolstering China's economy.
China is not the only country that enjoys a trade deficit with the United States. Japan, South Korea and numerous other countries trade heavily with the USA, often in products that Americans "need" in terms of electronics, but also a lot of products that could be made in North America but has been outsourced instead.
What the USA needs is more factories inside America that is hiring people, making products Americans can use (preferably products and equipment that will make them more competitive internationally) and are priced fairly.
Otherwise what we're opening ourselves up to is to communism... Oh dear, I said it. The dreaded C-word.
If the USA cannot shake off the recession and high unemployment rate America's economy will continue to flounder and will eventually be forced to create a more socialist-based economy as capitalism falls apart. This means government "work-fare programs", huge cutbacks to arts & culture funding (including Hollywood), an increase in food stamp usage, and a skyrocketing crime rate as Americans become more desperate for survival.
The 1st thing the USA needs to do is put a halt on all free trade discussions with Asia. America isn't ready for such big trading partners. The economy is too fragile right now.
The 2nd thing the USA needs to do is find cheaper alternatives to expensive oil. Oil prices are simply too high and its hampering transportation costs of materials/products. Hydrogen power perhaps.
The 3rd thing the USA needs to do is cut taxes on the poor, increase taxes on the rich. The poor will spend every dollar they have anyway, whereas the rich have a tendency to stick their money in the bank and sit on it.
The 4th thing is create tax breaks for companies that operate solely in the USA. This will benefit small businesses and new startups.
The 5th thing the USA needs to do is enforce mandatory retirements. Old people who keep working when they should be retired are essentially stealing jobs from younger Americans. Exceptions can be made for industries that have a shortage (ie. doctors), but otherwise these people need to be put out to pasture.
The end goal is to get more Americans working and building things again, creating opportunities for a new generation of hard working Americans.
The problem is its going to continue to skyrocket as long as the United States is fighting off a recession, two wars and high oil prices. US President Barack Obama thus has his work cut out for him, problems left behind by George W. Bush, and his problems are quantified by the statement that "Most Americans don't buy American, they buy Chinese."
"Most Americans don't buy American, they buy Chinese."That is not completely true. What is true that on average the USA imports $2 trillion USD worth of products every year of which approx. $300 billion is from China (approx 15%).
That is peanuts when you realize the USA only exports an average of $65 billion to China annually. The end result is an annual trade deficit of $235 billion taken out of the American economy and bolstering China's economy.
China is not the only country that enjoys a trade deficit with the United States. Japan, South Korea and numerous other countries trade heavily with the USA, often in products that Americans "need" in terms of electronics, but also a lot of products that could be made in North America but has been outsourced instead.
What the USA needs is more factories inside America that is hiring people, making products Americans can use (preferably products and equipment that will make them more competitive internationally) and are priced fairly.
Otherwise what we're opening ourselves up to is to communism... Oh dear, I said it. The dreaded C-word.
If the USA cannot shake off the recession and high unemployment rate America's economy will continue to flounder and will eventually be forced to create a more socialist-based economy as capitalism falls apart. This means government "work-fare programs", huge cutbacks to arts & culture funding (including Hollywood), an increase in food stamp usage, and a skyrocketing crime rate as Americans become more desperate for survival.
The 1st thing the USA needs to do is put a halt on all free trade discussions with Asia. America isn't ready for such big trading partners. The economy is too fragile right now.
The 2nd thing the USA needs to do is find cheaper alternatives to expensive oil. Oil prices are simply too high and its hampering transportation costs of materials/products. Hydrogen power perhaps.
The 3rd thing the USA needs to do is cut taxes on the poor, increase taxes on the rich. The poor will spend every dollar they have anyway, whereas the rich have a tendency to stick their money in the bank and sit on it.
The 4th thing is create tax breaks for companies that operate solely in the USA. This will benefit small businesses and new startups.
The 5th thing the USA needs to do is enforce mandatory retirements. Old people who keep working when they should be retired are essentially stealing jobs from younger Americans. Exceptions can be made for industries that have a shortage (ie. doctors), but otherwise these people need to be put out to pasture.
The end goal is to get more Americans working and building things again, creating opportunities for a new generation of hard working Americans.
27 Eylül 2012 Perşembe
Taxing Inflation: Why Americans Invest Overseas
To contact us Click HERE
Artificially Raising Taxes Reduces GDP
- By: Larry Walker, Jr. -
"Tax increases appear to have a very large, sustained and highly significant negative impact on the economy.” ~ Christina Romer, just prior to leaving the Obama Administration -
U.C. Berkley Professor and President Obama’s former Chair of his Council of Economic Advisers (CEA), Christina Romer, published a paper in 2010, concluding that a tax increase of 1 percent of GDP, about $160 billion today, reduces output over the next three years by nearly 3 percent, or $480 billion at current GDP figures. And according to the Bureau of Economic Analysis, per capita personal income is currently running at around $37,500. Thus, Barack Obama’s plan to raise taxes on the most productive American citizens would result in a loss of around 12.7 million jobs over the ensuing three-year period. But fortunately,
In
In 1997, the Republican-led Congress passed a tax-relief and deficit-reduction bill that was resisted but ultimately signed by President Clinton. One of the things the 1997 bill did was lower the top capital gains tax rate from 28 percent to 20 percent. It was actually the 1997 tax cuts, not the 1993
The same policy will work today. However, what Barack Obama is proposing is exactly the opposite. Obama’s notion of raising income taxes on some taxpayers, health care taxes on others, and capital gains rates on investors, to name a few, amounts to an artificial tax hike, which most economists agree will result in a reduction of GDP. Thus, Obama’s tax hikes are not in the best interests of the country. But he doesn’t appear to care about our common welfare.
Obama’s policies are admittedly not about economic growth, but rather about furthering his self contrived, yet erroneous, notion of fairness. Yet the truth is that the very concept of taxing capital gains is in itself unfair. The method in which capital gains are calculated in the
An Example: Let’s say an investor makes a five year commitment to invest $100,000 into a public or private company stock. And let’s say the rate of inflation is averaging 3.0% per year. By the time the investment is sold, what cost $100,000 five years ago, may cost as much as $115,000, due to inflation. So if no gain is realized on the investment, the investor automatically loses $15,000 in purchasing power.
Now let’s assume that five years later the investment has grown from $100,000 to $115,000. Under the current
So to summarize, an investor made a 5-year investment of $100,000, recognized a long-term capital gain of $15,000, paid a capital gains tax of $2,250, and got to keep $12,750, or 85.0% of the gain. Most people think this is fair enough, but there are a few scoffers out there who think a 15% capital gains tax is too low. So let’s examine the question of fairness.
Most of us are aware that the dollar has lost roughly 96% of its value since 1913 (see chart at the top). With that in mind, if instead of investing the $100,000, as in the example, the investor chose to hide it under a mattress, what would happen? For one thing, no taxes would be due. But at the same time, when the money is spent, 5 years later, its purchasing power will have declined by $15,000, again due to inflation. In fact, the reason most people choose to invest their money is to simply maintain the purchasing power of their savings.
In the example, the investment barely appreciated enough to keep pace with inflation. Therefore, no gain was realized. Inflation ate up $15,000 of the investor’s purchasing power, which was merely recovered through appreciation in the stock. But now along comes the
Capital Gains in
In
The following countries are even more progressive, they don’t tax capital gains at all:
One has to wonder why anyone in their right mind would be encouraged to invest in the
Pro-Growth Tax Policies
No wonder many Americans choose to invest abroad, and in some cases to renounce their citizenship entirely. These days, if you want a fair shot, and if you want to pay your fair share, you might have to set your sights beyond the shores of the
If the federal government refuses to implement policies which encourage GDP growth, then how does it expect the economy to grow? When our wealth is being slowly eroded by inflation, and then we’re taxed on the deteriorating value of our currency, it pretty much makes investing in the
Here’s some more food for thought. Why is interest income taxed? When a saver is earning less than 1.0% at a domestic bank, while inflation is running at more twice that rate, why is the federal government entitled to any part of what amounts to a decline in purchasing power? What you earn on a bank account these days isn’t interest income; it’s more like a taxable capital loss. What about dividends? Dividends are already taxed once at the corporate level, are not deductible by corporations for tax purposes, and then are taxed again after distribution to the investor (double taxation)? Taxing interest and dividends isn’t fair either, and the practice should therefore be repealed.
No American should ever have to pay a tax on capital, especially when upon its return the inflation adjusted value is the same or less than the original amount. Is the U.S. taxing the eroding value of the dollar because it makes sense, or perhaps because when the tax code was conceived no one anticipated that the dollar would lose 96% of its value over the ensuing 100 years? If you think our current method of taxing interest, dividends and capital gains is fair, then please explain your reasoning. If you think that taxing the deteriorating value of the dollar is a way to foster economic growth, then why has real GDP growth only averaged approximately 1.5% in the United States over the last 12 years?
"Action expresses priorities." ~ Mahatma Gandhi
References:
India Tax Laws and Tax System 2012
Tax Rates in India
India Mart – Computation of Capital Gains
Nine Million Dollars – Long Term Capital Gains Tax (LTCG) on Property Sale
Heritage Foundation - Tax Cuts, Not the Clinton Tax Hike, Produced the 1990s Boom
Wikipedia – Capital Gains Tax
Related:
Private Equity vs. Government Redistribution
Real Tax Reform II: Taxing Corporations
Monetary Reform, Part I | End the Debt
Taxing Inflation, Part 2 | Simple Pro-Growth Policies
To contact us Click HERE
Are we interested in treating the symptoms of poverty and economic stagnation through income redistribution and class warfare, or do we want to go at the root causes of poverty and economic stagnation by promoting pro-growth policies that promote prosperity? ~ Paul Ryan
… Promoting Prosperity
– By: Larry Walker, Jr. –
In the
But then the Dot Com Recession began, lasting from March through November 2001, wiping out capital and reducing gross private domestic investment to a low of 15.6% of GDP. Then Republicans passed the Jobs and Growth Tax Relief Reconciliation Act of 2003. The 2003 Act slashed capital gains rates to 5% and 15%, which boosted gross private domestic investment back to 17.2% of GDP in 2005 and 2006. But then the housing bubble burst and the Great Recession began, lasting from December 2007 through June 2009, eviscerating trillions of dollars in capital. Recessions typically destroy capital, and the Great Recession was no exception. Afraid of losing again, investors have been reluctant to place new capital at risk. Government spending has since spiraled out of control, absorbing capital from the private sector with the lure of low return guaranteed government securities.
Boosting gross private domestic investment back to 2000, 2005 and 2006 levels, or to between 17.2% and 17.5%, would add as much as 3.4% to GDP growth. But Barack Obama, through a series of temporary measures, coupled with threats of higher taxes, has done little to allay investors fears. So the question today is what can the U.S. government do to encourage more private investment in the domestic economy? Following are three simple policies which can and should be implemented right away.
Pro-Growth Tax Policies
Long-term capital gains are currently taxed at a top rate of 15%, while short-term gains are taxed as ordinary income (at rates ranging from 10% to 35%). At the same time, capital losses are limited to the lesser of $3,000 per year, or up to the amount of concurrent capital gains. Interest income and ordinary dividends are currently taxed as ordinary income, while qualified dividends (paid on stocks held for 60 days or longer) are treated as long-term capital gains and taxed at a maximum rate of 15%.
But this is all subject to change next year – with the rate on long-term capital gains increasing to a maximum of 20%, and the tax on interest, ordinary dividends and qualified dividends all increasing to ordinary rates of between 15% and 39.6%. Until Congress either changes or extends the current rates, uncertainty and flagging private domestic investment will prevail. But a more exigent question is whether taxing any form of return on capital investment is fair. What’s a fair tax for the return on investment?
1. Indexing Capital Gains
As discussed in Part I, in
However, in the
For example, if you had invested $100,000 in 1981, your investment would have the same purchasing power as $261,497 today. That’s because annual inflation has averaged 3.15% in the
Does the
Why not simply index capital gains to inflation, tax real capital gains at ordinary tax rates, and allow an unlimited amount of real capital losses to be claimed within the year recognized? That way it’s not necessary to play the class warfare game. Making capital gains taxes fairer for everyone is a way to increase private domestic investment and GDP, while at the same time attracting capital back to the U.S. and away from what are currently more just investment havens.
2. No Tax on Interest Income
In the
Focusing on taxable interest, when the interest rate earned is less than the inflation rate, why is it considered taxable? If an investor isn’t earning at least the inflation rate, there are no real earnings, since the investor suffers a loss in purchasing power. For example, according to FDIC.gov, the national average interest rate paid on bank savings accounts is currently 0.09%, and the average rate on 60-month certificates of deposit, whether over or under $100,000, is 1.06%. Meanwhile, inflation has averaged 1.81% over the last five years (lower than normal due to the recession). So at today’s interest rates, an investor with $100,000 in a savings account is losing something on the order of 1.71% in purchasing power each year. This adds up over time. At current averages it would amount to loss in capital of 8.55% over five years. And that doesn’t include service charges some banks impose for the privilege of having an account.
Interest rates banks pay today aren’t a reward, but rather a punishment. But as if interest rates aren’t pathetic enough, after losing purchasing power while trying to save a dollar or two, the federal government then levies a tax on the decline in value, ensuring that no American will ever get ahead. The return on U.S. Treasury securities isn't any better. On July 16th, the U.S. Treasury was somehow able to sell 3-year Treasury Notes offering an interest rate of 0.25%, and a yield of 0.366%. That’s laughable especially considering that the interest earned is taxable as ordinary income. Meanwhile, the inflation rate for urban consumers was 2.93% last year, and is expected to reach 3.00% in 2013. Are we paying our fair share yet?
The federal government currently taxes interest income at rates ranging between 10% and 35%, yet those rates are scheduled to increase to between 15% and 39.6% in 2013. Barack Obama’s solution is to do nothing for anyone making less than $250,000, and to raise rates to 36% and 39.6% on those making more. Mitt Romney’s solution is to eliminate the tax on interest for taxpayers with incomes below $200,000, while lowering ordinary income tax rates to between 8% and 28%. But Romney shouldn’t even have to play the class warfare game.
Either taxing interest is fair, or it’s not. And if it’s not fair, then it’s not fair for any American. If the
3. No Tax on Dividends
In 2003, President George W. Bush proposed to eliminate the
In
Naturally, Barack Obama’s solution is to raise taxes on dividends. Obama plans to keep Bush’s lower 10% tax bracket in place, but to raise top tax rates to 36% and 39.6% on those most likely to invest in dividend paying ventures, those making more than $250,000. Mitt Romney, on the other hand, would eliminate the tax on dividends for taxpayers with incomes below $200.000, while lowering ordinary income tax rates to between 8% and 28%. I believe that Romney is on the right track; however, if double taxation is unfair, then it’s just not fair – no matter how much income is involved.
Dividends should either be taxable to the corporation or the individual, but not both. And lest we forget, a tax on dividends may also be punitive, in the sense that when an investor’s returns are lower than the rate of inflation, purchasing power is being lost, not gained. If the government insists on taxing both entities, then the tax should only apply to individuals on the amount of return in excess of the rate of inflation.
Summary
No American should have to pay a tax on capital gains or interest income, unless the return on investment exceeds the rate of inflation. No American should have to pay a tax on dividends when the tax has already been paid by a corporation. Whether it’s easier to just do away with investment taxes altogether is subjective, but I do believe that it’s in best interests of the
Barack Obama has proposed to do nothing for 98% of taxpayers, and to raise taxes on the investment income of those making more than $250,000. He’s so stuck on the class warfare tack that he has totally forgotten to put anything on the table which would encourage greater levels of savings and investment within the
Mitt Romney has proposed policies which will encourage greater savings and investment. Although his plan isn’t perfect, it’s far better than the alternative. Romney would eliminate the tax on capital gains, interest and dividends for taxpayers making less than $200,000. He would also lower the bottom tax rate to 8% from 10%, and top rates to 28% from 35%. Romney’s policies are more likely to retain capital within the
Related:
Taxing Inflation: Why Americans Invest Overseas
Data: Spreadsheet on Google Drive
Kaydol:
Kayıtlar (Atom)