What is the Difference Between the Debt and the Deficit?
Click here for a brief explanation as well as some relevant figures on definitions from the Center on Budget and Policy Priorities.
How Would You Close the Budget Gap
Try this interactive Budget Puzzle from the New York Times here. Looking for more? You can try your hand at closing the budget gap with yet another Budget Simulator from the Committee for a Responsible Federal Budget here.
Deficit Reduction Proposals
You may have heard about the various proposals to get our budget in balance. While I may not agree with all of the recommendations, these proposals illustrate the magnitude of the problem with must tackle. Learn more about them here.
President Obama’s National Commission on Fiscal Responsibility and Reform. The Commission was charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run. Click here to read more.
The Bipartisan Policy Center. BPC is a non-profit organization that was established in 2007 by former Senate Majority Leaders Howard Baker, Tom Daschle, Bob Dole and George Mitchell. Click here to read more.
Galston-MacGuineas Plan. Maya MacGuineas is director of the Fiscal Policy Program at the New America Foundation and president of the Committee for a Responsible Federal Budget. Bill Galston is a senior fellow at the Brookings Institution. Click here to read more.
Schakowsky Plan. Rep. Jan Schakowsky (D-IL) is a member of the bipartisan National Commission on Fiscal Responsibility and Reform. Click here to read more.
Many of these proposals have common threads. The chart below shows the similarities among some of the plans (Chart Courtesy: The Washington Post). Click on the image to open in a new window.
Everybody is talking about reducing spending, but another part of the budget problem is the proliferation of tax expenditures. Also called spending through the Tax Code, tax expenditures cost over $1 trillion, roughly 25% of our overall government spending.
What is a tax expenditure? Tax expenditures are officially defined as, “those revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability.” Getting this Tax Code spending under control is a critical part of solve the budget crisis.
I have been a leader in calling for greater scrutiny of these tax expenditures to ensure we are getting the most “bang-for-the-buck.” You can read more about the problem of the growth of tax expenditures and my work to curb their growth by clicking here.
To view my speech at the Center for American Progress and related articles, click here.
Learn More about How the New House Rules Will Cause Great Harm to the Deficit.
At the beginning of every Congress, the majority party proposes new rules to guide the upcoming Congress. Disappointingly, despite all their professed concern about the size of the deficit, among the first acts of the Republicans is to propose new rules that would actually increase the deficit and further distort our Tax Code. They are planning to replace the fiscally responsible Pay-As-You-Go (PAYGO) budgeting rule with their so-called “Cut-Go” rule, which allows all tax cuts to go on the “national credit card” instead of actually paying for them. This change I strongly oppose this change because we cannot afford to return to the fiction that tax breaks do not add to the deficit. I am further concerned that the requirement that only spending increases must be offset--and not tax breaks--further encourages the proliferation of tax loopholes and unjustified tax exceptions. You can view my piece in the Huffington Post by clicking here.
To read the report from the Center on Budget and Policy Priorities click here.
As you may know, we were on track to hit the debt ceiling on August 2. A last minute deal averted the crisis by raising the debt ceiling in connection with deficit reduction measures This section will provide resources to assist you in following the contours of this debate and its resolution.
What Is the Debt Ceiling?
Even though the debt ceiling debate has been resolved for the moment, many may still be wondering exactly what the debt ceiling is.
Here are two articles that provide a basic overview of the debt ceiling. Article 1. Article 2.
Want more information? Click here to watch a recent PBS NewsHour segment.
Why is the Debt Ceiling So Controversial?
The debt ceiling is normally a routine matter. It was raised 7 times under George W. Bush, for example. This year is different. Click here for an analysis of why from a columnist with whom I normally disagree. In this case, however, I believe he has captured the essence of the problem.
Consequences of a Default
As you may have heard, the consequences of a default caused by failing to raise the debt ceiling could be catastrophic. Click here for an analysis by economist Simon Johnson on the devastating impact default would have on our economy. Center for American Progress takes a look at the impact of default on National security and on the poor and people of color. You may also be interested in an analysis of how failing to raise the debt ceiling could harm our fragile recovery generally.
Failure to raise the debt ceiling means nearly impossible choices about which bills get paid and which don’t. If you were the President, what choices would you make in the event of a default? Try this interactive exercise and explore Treasury’s limited options.
Here is a summary of the final deal.
Negotiations over Raising the Debt Ceiling
A lot of people have asked me for more information about the various plans for deficit reduction associated with an agreement to raise the debt ceiling. Click here to view the New York Times interactive comparison between the plans.
Republican Plan to Reform Our Tax Code
Learn More How the Republican Plan to Reform our Tax Code Increases the National Debt
Addressing our long-term fiscal challenges and getting our soaring national debt under control are critical to getting our economy moving in the right direction. Almost daily, Republicans on Capitol Hill talk about the need to reign in our growing deficit. However, their latest proposal to reform the tax code demonstrates once again how their policies do not match their rhetoric. The latest tax reform plan put forth by Chairman Camp, head of the Ways and Means Committee, cuts the corporate tax rate from 35% to 25%. Recently, the non-partisan Joint Committee on Taxation (JCT), recognized for its objectivity and expertise, found that there is simply no way to cut the rate to 25% without adding to the federal deficit. Republicans dogmatically believe that we can cut the corporate tax rate without adding to the national deficit. Now we know that the Republican tax plan, at least with respect to cutting the corporate tax rate to 25%, without having to borrow more from the Chinese or raise other taxes, is pure fantasy.
Want more information? Here are two articles describing how the Republican tax plan will add to our national debt:
A Balanced Budget Amendment Will Not Fix Our Deficit Crisis
What is a Balanced Budget Amendment?
Recently, the Republican led House forced a vote on a so-called “balanced budget” amendment to our Constitution. That amendment would have required total federal outlays in any given year not exceed the total amount of revenue taken in unless Congress voted with a three-fifths majority to allow it. With my vote against it, the House failed to pass this amendment.
What a prominent conservative commentator thinks about a balanced budget amendment.
Even some conservative economists recognize the insanity of adding a balanced budget amendment to the supreme law of the land. Bruce Bartlett, a former economic advisor for President Reagan, recently wrote an article in the New York Times titled: The Balanced Budget Amendment Delusion. In that article, Mr. Bartlett points out that balancing the budget annually is conceptually a reasonable proposition, but requiring it via the Constitution is in his words a “dreadful idea” that is frankly “nuts.”
Proponents argue that a balanced budget is the only thing that will reign in our soaring deficits. Yet, these are the same folks that continually push for even more tax cuts for both the wealthiest among us and corporations that are seeing record profits despite evidence that more tax cuts only drive us deeper into debt. These are the same folks that reject common sense proposals such as closing corporate tax loopholes and asking the most privileged in our society to pay their fare share, policies that would help bring down our debt. As Mr. Bartlett candidly states in his New York Times article, “Republicans don’t care one whit about actually balancing the budget.” If you would like to read Mr. Bartlett’s article in it entirety, please click on this link, http://economix.blogs.nytimes.com/2011/11/15/the-balanced-budget-amendment-delusion/s.
As you know, I have consistently fought for fiscal discipline and balanced budgets no matter which party was in power. But a constitutional amendment is not a path to a balanced budget; it is only an excuse for members of this body for not casting the tough votes to achieve one. I am thankful that that the House rejected this latest attempt by Republicans to enact a balanced budget amendment that would have jeopardized our economic future, threatened vital programs such as Social Security and Medicare, and forced cuts to veterans programs. You can listen to my remarks by clicking on this link http://youtu.be/9xYwKKX7rOg
Of course, part of the process of determining how to get our deficit under control involves listening to you and your priorities. I wanted to bring to your attention the “Budget Puzzle” created by the New York Times, which allows you to choose various options to try to close the budget gap. You can try your hand at bringing down the deficit by clicking here