Vail Daily letter: Hard work ahead
Vail, CO, Colorado
Recent Congressional Budget Office reports, if released prior to the election, would have posed grave problems for Obama. “Economic Effects of Policies Contributing to Fiscal Tightening in 2013,” a comparison of the costs-benefits of various courses of action that can be taken to reduce the deficit, estimates that should Obama only accept a bill that indexes the alternative minimum tax for inflation, extends the Bush tax cuts but excludes the top 1 percent, 200,000 American jobs will be lost compared to a course of action where he accepts the indexing and extension of the tax cuts.
The report also provided a tutorial on taxation: “Under current law, the federal tax system is progressive, meaning that average tax rates rise with income. In 2009, households in the bottom one-fifth of the income distribution, who had an average before-tax income of $23,500, including transfer payments such as Social Security benefits, paid a total of about 1 percent of their income in federal taxes. Households in the middle quintile, with average before-tax income of $64,300, paid 11 percent. And households in the highest quintile, with average before-tax income of $223,500, paid 23 percent. Within the top quintile, average tax rates were higher for higher-income groups. For instance, households in the top 1 percent of the income distribution had an average tax rate of about 29 percent.”
The second report, “Choices for Debt Reduction,” bluntly states: “In sum, a wide gap exists between the future cost of the services that the public has become accustomed to receiving from the federal government, especially in the form of benefits for older people, and the tax revenues that the public has been sending to the government to pay for those services. Because the federal budget is on an unsustainable path under current policies, those policies will need to be changed in significant ways. It is possible to keep tax revenues at their historical average percentage of GDP, but only by making substantial cuts, relative to current policies, in the large benefit programs that aid a broad group of people at some point in their lives. Alternatively, it is possible to keep the policies for those large benefit programs unchanged, but only by raising taxes substantially, relative to current policies, for a broad segment of the population. Changes in other federal programs can affect the size of the changes needed in taxes or large benefit programs, but they cannot eliminate the basic trade-off between those two parts of the budget.”
One health care option stood out: “Of the health-related proposals for which CBO has published an estimate, the one with the largest savings would repeal provisions of the Affordable Care Act that expand health insurance coverage. That option would decrease spending for major health care programs by nearly 15 percent in 2020 and would reduce the deficit by roughly $150 billion in that year, according to estimates by CBO and the staff of the Joint Committee on Taxation. The option would also increase the number of people without health insurance coverage by an estimated 29 million in 2020. Various other changes to health care programs for which CBO has published estimates would save between $5 billion and $50 billion each in 2020 (not counting interactions with other potential policy changes).”
A February Congressional Budget Office report, “Understanding and Responding to Persistent High Unemployment,” illustrates with data about long-term unemployed as a share of all unemployed that the nature of current unemployment is fundamentally different from earlier periods of high unemployment, one consequence being that the traditional methodology for reporting unemployment masks the seriousness of the problem, understating it.
We clearly face difficult challenges, and we will not be equal to them if we obscure our understanding with false populist appeals. Slogans are easy; solutions are difficult.
J. A. Valersky