Widening federal deficit looms over stimulus talks

Discussion in 'Politics' started by KenH, Jan 24, 2008.

  1. KenH

    KenH
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    Widening federal deficit looms over stimulus talks

    Kevin G. Hall | McClatchy Newspapers

    Posted on Wed. Jan. 23, 2008

    WASHINGTON — As the Bush administration and Congress try to craft an economic stimulus plan, a dark cloud hangs over them: the federal deficit.
    Iraq war costs of $9.6 billion a month and a gaping federal deficit that's funded by borrowing from foreign governments limit how aggressively the U.S. government can cut taxes or boost spending to fend off a recession.

    Just over the horizon, a fiscal crisis that some call a day of reckoning looms larger.

    Statistics released Wednesday by the nonpartisan Congressional Budget Office show that the federal deficit — the gap between what the government spends and the revenue it collects — is projected to leap to $250 billion in the current budget year. That's up 53 percent from the $163 billion deficit in fiscal 2007.

    If Congress approves the roughly $140 billion economic stimulus plan now being discussed, the deficit for the current 2008 fiscal year, which began last Oct. 1, could swell to almost $400 billion.

    The CBO presented those estimates to Congress on Wednesday as part of its budget and economic outlook for 2008 to 2018.

    "Ongoing increases in health care costs, along with the aging of the population, are expected to put substantial pressure on the budget in coming decades," Director Peter Orszag told the House Budget Committee. "Those trends are already evident in the current projection period."

    Lawmakers can sharply cut government spending, sharply raise taxes or pass some combination of spending cuts and tax increases, Orszag said....

    Democrats and Republicans alike suggest that a temporary economic spark prompted by the right kind of stimulus should produce tax revenues to replace what the Treasury is losing.

    They're right. But only if the U.S. economy doesn't fall into a recession before the stimulus takes effect. If recession strikes, there would be even less incoming revenue and a bigger federal deficit.

    "While much attention will be paid in the coming weeks to the contours of a fiscal stimulus bill, no one should overlook the implication of today's report by the Congressional Budget Office that we are heading into the baby boomers' retirement years in a position of fiscal weakness," said Robert Bixby, the head of the Concord Coalition, a budget watchdog group, in a statement Wednesday.

    - rest at www.concordcoalition.org/news/article-storage/2008/mcclatchy-0123.htm
     
  2. Joseph M. Smith

    Joseph M. Smith
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    It is going to take a huge amount of "stimulus" to generate enough new economic activity to, in turn, generate enough tax money to offset this deficit. I cannot be very optimistic about this form of income redistribution.

    But it is an ill wind indeed that blows no one some good. I am thinking of suggesting to the members of my church that they sign their rebate/gift/distribution checks over to the church for its debt retirement. At least one debt can be paid down instead of being inflated!!
     
  3. TomVols

    TomVols
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    I wish you could opt out of this rebate fiasco. I don't want it, especially since I will likely have to pay it back next year. The govt is giving me my hard-earned dollars back only to take it back from me a year later? Yeah, makes sense.

    Will will the Keynesian ether wear off?

    Speaking of which, did you hear Huckabee last night proposing that the real stimulus to the economy would be a national public works project? Was he channeling Keynes on purpose?
     
  4. Dagwood

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    If this is what you think will happen, take the money, put it in some type of investment till next year and make a little money off your money.

    BTW, if you really don't want this rebate, PM me and I will give you my address. :laugh:
     
  5. TomVols

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    Sure...I'll put it in an investment, where I will have to pay taxes on the earnings, PLUS the rebate. Gotta love how this tax code punishes evil things like saving :laugh:

    And I'll have to take it, so sorry I won't need your address :laugh: There are two children's hospitals and a church that will be getting this money.
     
  6. KenH

    KenH
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    Please explain.
     
  7. TomVols

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    If memory serves me correctly, we had to include the 2001 rebate in our 2002 tax calculations. I do not recall the particulars. I forget if it was taxable income or we had to debit our TAGI by the amount of the rebate. It was more like an advance on 2002's tax refund. My readings thus far indicate that we would have to treat this rebate (which will not get to taxpayers before summer) in the same way.

    Refresh my memory...it's been a long week and a long weekend thus far, and I haven't even preached yet :tonofbricks:

    Nevermind the fact that I don't want it because it's a band-aid on a broken bone. Nevermind the fact that it smacks of Keynesian thinking. It will have no effect. There was a wonderful editorial about the rebate this week in the WSJ. The rebate was credited with helping revive the tumbling economy Bush inherited. But this rebate happened alongside the tax cuts for working Americans which was part of EGTRRA, which was where the real credit should be given.
     
  8. KenH

    KenH
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    No, we did not have to give back the 2002 instant tax cut check amount. We won't have to give this one back neither.

    It would be political suicide for politicians to give us $600 a piece in June, ask us to spend it, and then ask for it back the following April.

    It is really just a tax cut without changing the tax tables and without having to get it spread over a whole year.

    Unfortunately, the Bush tax cuts helped the wealthy and corporations way more than it help us working folk. I hope that they are not made permanent but are instead restructured to help out the middle and lowe income classes in these United States. A good start would be to make the FICA tax a tax deduction on our income tax return.
     
    #8 KenH, Jan 26, 2008
    Last edited: Jan 26, 2008
  9. TomVols

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    Are you sure? Do you have a copy of the 2001 return around?

    I'm surprised someone as wise as you has bought the class-warfare bromide about how the tax cuts did not help average Americans but only the wealthy. In 2001, my wife and I made less than $40,000. I got a tax cut. I know many teachers, for instance, who got their taxes cut. I did tons of tax returns that saw the tax cut and I didn't do upper income tax returns. They came to me and said "These tax cuts were to help the wealthiest Americans. We had no idea we were in that group" :laugh:

    FICA as a deduction? Never happen.
     
  10. KenH

    KenH
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    1) Yes. I do my own taxes. I didn't give mine back. Did you?

    2) That is not what I wrote. Please read my comment again.
     
  11. TomVols

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    Your statement:
    If you have a blank copy of the 2001 return, pdf it to me. (particulary page two of the 1040). Perhaps I am mistaken, but I know it was bandied about. As someone who prepares taxes (as well as my own) I thought that was the case. But I'm willing to stand corrected.
     
  12. KenH

    KenH
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  13. TomVols

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    Thanks. I went to the site before that and got the instructions. I stand corrected. The advance rebate was not taxable. There was talk of making it such, and my memory got the two mixed. Like I said earlier today...it's been a long week and weekend, and I still have a very busy Sunday ahead of me!

    Let's hope that it doesn't require a repay this time around. Of course, I still believe it's a bad idea. We still need real tax reform.
     

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