Wonkbook: Happy purchase-the-federal-government day


If you’ve not already got your tax return postmarked, e-filed or hand-delivered to Timothy Geithner, it’s time to get moving. Today’s the big day. But though April 15th (well, this year, April 18th) gets billed as tax day, it’s actually “purchase the federal government for a year” day. We’re not just spending money. We’re buying something. And over the last year, the centrist-left think tank Third Way and the center-left journal Democracy have mounted an extraordinary campaign to persuade politicians and the IRS that we should be told what, exactly, we’re purchasing.

The idea is to give each and every taxpayer a receipt. Technically, this would be trivially simple. But to get the IRS to actually do it, Congress needs to pass a law. Reps. Mike Quigley, Jim Cooper, Aaron Schock, Todd Platts and Dave Reichert have introduced exactly such a proposal in the House (download a sample of their receipt here). In the meantime, however, the closest we can come is the online tax-receipt calculator that the White House rolled out last week.

So let’s say you’re a family of four with $80,000 in income (you can head over there and input your real information, of course). In 2010, you paid almost $10,000 in taxes. About $5,000 -- the biggest chunk by far -- went to Social Security. Then came Medicare, at $1,160, and defense, at $1,015. Assorted other health-care programs (Medicaid, the Children’s Health Insurance Program, COBRA, disease control and food safety, etc) ate up another $938, while job and income security programs (food stamps, unemployment insurance, the Earned Income tax Credit, housing assistance) grabbed about $850. Then there’s a big drop-off into the miscellany of the federal government: Education only cost you $185, because most of it’s paid for at the state and local level. Environmental and energy policy was $81. International spending -- including everything from foreign aid to keeping our embassies open -- was about $65. Agricultural programs were $30. Interest on the debt was almost $300.

But though that may be all the federal government you’re buying, it’s not all the federal government you’re getting. We’re running big deficits, which means some of the costs for what we’re purchasing now are being left till later. And as Stephen Ohlemacher details in a great article today, most of us are paying less than we were two decades ago, even though we’re not getting less government than we were. Since 1992, the richest 400 taxpayers in America -- average income, $345 million -- have seen their federal income tax rate drop from 26 percent to 17 percent. The average taxpayer has seen their rate slip from 9.9 percent to 9.3 percent. So some of us are having an easier day than others. But for one day, most all of us -- whether we’re rich or not-so-rich -- are buying the same thing.

Five in the morning

1) The House passed Paul Ryan’s budget on Friday, report Paul Kane and Philip Rucker: “House Republicans approved a budget on Friday that would fundamentally alter Medicare and Medicaid, lower taxes on individuals and corporations and cut $4.4 trillion from the nation’s deficit over the next decade. With its passing, Republicans have officially put forth their vision for reducing the nation’s debt and defining how the federal government fits into people’s lives...All but four Republicans voted for Ryan’s 2012 budget blueprint, and every Democrat present voted against it, for a final tally of 235 to 193. The Ryan budget has virtually no chance of being enacted into law, considering that Democrats still control the Senate and Obama opposes much of it.”

2) House Democrats are demanding a bigger role in future budget negotiations: “Their votes required to pass a budget for the year, House Democrats expect a bigger role in the upcoming fiscal showdowns and other matters in which House Speaker John Boehner can’t muster a GOP majority, Democratic leader Nancy Pelosi said Friday. Republicans “don’t have the votes to pass some of these bills,” Pelosi, D-Calif., said during an interview with The Associated Press. ‘If we’re going to have to supply the votes, we’re going to have to be at the table.’ It was a warning to President Barack Obama as much as to Boehner.”

3) Obama concedes a debt limit deal will have to include spending cuts, reports Zachary Goldfarb: “President Obama said Friday that Congress will have to agree to make cuts in federal spending if it is also to reach a crucial deal in the coming months on raising the limit on how much the government can borrow. ‘I think it’s absolutely right that it’s not going to happen without some spending cuts,’ Obama said in an interview with the Associated Press. Republicans have been saying for weeks that they would not raise the $14.3 trillion debt limit without deeper spending concessions by the president and congressional Democrats. The White House, however, has been saying that a vote to increase the debt limit must be separate from any other vote on spending. The nation’s debt is quickly approaching its limit and on pace to breach the ceiling in mid-May.”

4) The rich are paying less in taxes than they did in past decades, reports Stephen Ohlemacher: “As millions of procrastinators scramble to meet Monday’s tax filing deadline, ponder this: The super rich pay a lot less in taxes than they did a couple of decades ago, and nearly half of U.S. households pay no income taxes at all. The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992. Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent.”

5) Odds of a Social Security deal appear to be increasing, reports Laura Meckler: “A combination of factors augur for a deal. Neither Mr. Obama nor Republican Rep. Paul Ryan, chairman of the House Budget Committee, offered any specific ideas for fixing Social Security in their budget plans this month. Unlike proposals for Medicare, taxes and spending, there was nothing to be attacked by the either party. In Washington’s sometimes twisted logic, not offering ideas can make a deal more, not less, likely. In addition, Mr. Ryan appears to have put aside the controversial Bush-era idea of diverting Social Security funds into private accounts. A Ryan aide said late last week the congressman is comfortable with a solution that does not include privatization.”

Great tastes that taste great together interlude: Lil Buck jooks to Yo-Yo Ma playing Saint-Saëns’ “The Swan”.

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Still to come: House freshmen are struggling with the politics and the realities of the debt limit; the IMF/World Bank meeting was sort of terrifying; Paul Krugman feels bipartisanship leans conservative these days; the administration’s Medicare chief says sharp cuts won’t be necessary of some of our reforms work; the budget deal cuts funds for job retraining programs; the Supreme Court is set to rule on state efforts to reduce greenhouse gas emissions; and some classic magazine journalism.

Economy

House freshman are facing a tough choice as a debt limit increase vote approaches, report Philip Rucker: “They ran against debt. They swore and swore again that they’d cut up the nation’s credit card. But now the 87 freshmen House Republicans are facing intense pressure from administration officials and even some natural allies on why they should -- indeed, why they must -- vote to allow the federal government to go even deeper into debt. Financial industry executives, business leaders and Treasury Department officials are visiting the freshmen in their offices, briefing them in small groups and even cornering them at dinner parties. It’s all part of a behind-the-scenes campaign to school congressional newcomers in the economic stakes of Washington’s next big fiscal fight: over the debt ceiling.”

The IMF and World Bank’s meetings this weekend urged caution, reports Neil Irwin: “If there is one overriding theme that has dominated the spring meetings of the International Monetary Fund and World Bank that concluded Saturday in Washington, it is this: We’re not out of the woods yet. While this is not a time of wrenching financial crisis as in 2008 and 2009, in every corner of the global economy, some sort of major challenge -- or reckoning -- is underway. The United States has high unemployment and a yawning budget deficit that will need to be brought down over time. Europe is facing debt crises in several nations...Major emerging nations such as China, India and Brazil are grappling with high inflation spurred by overheating economies and rising food and fuel prices; and poorer nations, particularly in Africa, are bearing the brunt of the higher food prices.”

The budget deal cuts job retraining programs, reports Peter Whoriskey: “Facing recession-weary audiences across the country, President Obama frequently highlighted the possibilities of job training for the unemployed. The new fields of green technology, advanced manufacturing or clean energy would require new skills that job training programs could provide. More education would bolster the workforce and the economy...But details of the budget compromise this week between the president and congressional leaders show federal funding for job training programs has taken a significant hit -- more than $870 million in all. Included are cuts to occupational training grants at community colleges, green jobs classes and a program to help low-income older people acquire work skills.”

A debt reduction trigger is good policy, writes Alan Krueger: “Economists prefer rules over discretion when parties can choose to reverse themselves as tough decisions arise. Think of an overweight person intending to lose weight. He could use his judgment every time he is confronted with dessert. But that one extra slice of cake would not really matter much, so there is a tendency to indulge today and push restraint off until later. If, however, he buys all his meals in advance and commits to eat only those meals, he builds restraint into his diet. Rules can commit individuals or groups to a predetermined path. If the political process always led to time-consistent, optimal decisions, rules would not be necessary. But that is not the world we inhabit.”

Letting the tax rates built into current law take effect would lead to unbearably high tax rates on the middle class, writes Ross Douthat: “Today, for instance, a family of four making the median income — $94,900 — pays 15 percent in federal taxes. By 2035, under the C.B.O. projection, payroll and income taxes would claim 25 percent of that family’s paycheck. The marginal tax rate on labor income would rise from 29 percent to 38 percent. Federal tax revenue, which has averaged 18 percent of G.D.P. since World War II, would hit 23 percent by the 2030s and climb even higher after that. Such unprecedented levels of taxation would throw up hurdles to entrepreneurship, family formation and upward mobility. (Or as the C.B.O. puts it, in its understated way, they would ‘tend to discourage some economic activity,’ and ‘harm the economy through the impact on people’s decisions about how much to work and save.’)”

”Bipartisanship” leads to conservative policy, writes Paul Krugman: “Sorry to be cynical, but right now ‘bipartisan’ is usually code for assembling some conservative Democrats and ultraconservative Republicans -- all of them with close ties to the wealthy, and many who are wealthy themselves -- and having them proclaim that low taxes on high incomes and drastic cuts in social insurance are the only possible solution. This would be a corrupt, undemocratic way to make decisions about the shape of our society even if those involved really were wise men with a deep grasp of the issues. It’s much worse when many of those at the table are the sort of people who solicit and believe the kind of policy analyses that the Heritage Foundation supplies.”

’60s pop interlude: Evie Sands sings “I Can’t Let Go”.

Health Care

Medicare chief Donald Berwick says Obama’s cuts may not be necessary, reports Susan Jaffe: “A day after President Barack Obama proposed strengthening an independent commission to control Medicare’s costs, the program’s administrator said such oversight won’t be necessary because new efforts to reduce waste should slow down spending and even improve the quality of care. ‘We don’t have to get to that point,’ Medicare chief Donald Berwick told Kaiser Health News Thursday...Medicare, the government’s health insurance program for 48 million older and disabled Americans, spent about $509 billion last year. Under the deficit reduction outline Obama unveiled Wednesday, if Medicare spending grows faster than gross domestic product plus 0.5 percentage point, it would trigger cost reduction recommendations from Medicare’s Independent Payment Advisory Board.”

Paul Ryan’s plan health-care targets simply aren’t achievable, writes Josh Barro: “Constraining the growth of health spending isn’t a lost cause, and leaders in Washington shouldn’t abandon it. But they have to be realistic when they come up with estimates of future spending growth. Previous proposals, such as Simpson and Bowles’s and Alice Rivlin and Pete Domenici’s, have tried to limit spending growth to the rate of GDP growth plus 1 percent, or to the average of CPI and medical inflation. These rates are already aggressively low, but they’re achievable. A growth trend in line with CPI, like Ryan’s, simply isn’t plausible.”

Domestic Policy

The budget deal threatens funding for housing counselors, reports Dina ElBoghdady: “The budget deal that’s keeping the federal government running slashed the $88 million that the Department of Housing and Urban Development grants to housing counselors, a move that could raise costs for those services or wipe them out in some areas. The money enabled the counseling agencies to offer their services -- everything from advice on foreclosure prevention to rental assistance -- free of charge or for a small fee. But congressional lawmakers concluded the money was not well spent...The cuts come in the midst of a housing crisis that has left many homeowners in need of help as they struggle to stay in their homes or find rentals after eviction. Housing counseling agencies doubt the funds will be restored and fear that they won’t be able to make up the shortfall from alternative sources.”

Obama will ignore the budget deal’s ban on czars: http://politi.co/eNB5jh

Elites owe the American people more than they offer now, writes EJ Dionne: “The influence of the ruling class comes from its position in the economy and its ability to pay for the politicians’ campaigns. There are not a lot of working-class people at those fundraisers President Obama has been attending lately...Those elites will have no moral standing to argue for higher taxes on middle-income people or cuts in government programs until they acknowledge how much wealthier they have become than the rest of us and how much pressure they have brought over the years to cut their own taxes. Resolving the deficit problem requires the very rich to recognize their obligation to contribute more to a government that, measured against other wealthy nations, is neither investing enough in the future nor doing a very good job of improving the lives and opportunities of the less affluent.”

Classic magazine journalism interlude: F. Scott Fitzgerald’s “The Crack-Up”, from the February 1936 issue of Esquire .

Energy

The Supreme Court is set to rule on state efforts to curb greenhouse gas emissions, report Jess Bravin and Stephen Power: “A battle over whether states can use nuisance laws to curb greenhouse-gas emissions from power plants will come to the Supreme Court Tuesday in a case that puts a twist on the debate over climate policy. The case pits a coalition of states against five of the nation’s biggest power companies and the Obama administration, which has said it intends to curb greenhouse-gas emissions from big utilities but objects to the way the states want to do it. The arguments come amid a running dispute between the administration and members of Congress who want to block the Environmental Protection Agency’s effort to regulate the carbon dioxide pumped out of power plant smokestacks as a hazardous pollutant under the Clean Air Act.”

Obama met with a group of environmental activists on Friday: http://politi.co/eSkzGm

Car companies are more enthusiastic about hydrogen cars than the Obama administration, reports Peter Whoriskey: “Major foreign and domestic automakers that have invested billions in developing a hydrogen fuel cell car say the possibilities are near at hand and that by as early as 2015, the vehicles could begin appearing in showrooms...The Obama administration, however, is skeptical at best. In recent months, it has outraged the technology’s advocates with budget cuts for hydrogen program and renewed the debate over whether hydrogen cars are a pipe dream or a viable means of reducing the nation’s oil dependence. First it cut the proposed budget for a key hydrogen program for the third year in a row by 40 percent. Then, in a major review of energy technology it touted hybrid and electric cars but was silent on hydrogen.”

The GOP needs to get real about global warming, writes Fred Hiatt: “The Republican self-deception that draws the most attention is the refusal to believe that Barack Obama is American-born. But there are Republican doctrinal fantasies that may be more dangerous: the conviction that taxes can always go down, but never up, for example, and the gathering consensus among Republican leaders that human-caused climate change does not exist...Just a few years ago, leading Republicans -- John McCain, Sarah Palin, Mitt Romney, Newt Gingrich and Tim Pawlenty among them -- not only accepted global warming as real but supported some kind of market-based mechanism to raise the cost of burning fossil fuels. Now polls show declining numbers of Republicans believing in climate change, and a minority of those believing humans are at fault, so the candidates are scrambling to disavow their past positions.”

Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.

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