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NTU Foundation's FY 2014 Budget Breakdown
Posted By: Dan Barrett - 04/11/13

Recycling policies is a common practice in Washington DC. In conducting NTU Foundation's BillTally research, we find many pieces of legislation that are exact matches to the previous Congress' version. Many Hill offices say the bills are placeholder legislation to show that Members care about a specific issue or see their ideas as the best solution to a local, state, or national problem. However, when it comes to the federal budget, Americans have at least seen some variance in what the President would like to do with your tax dollars. It's not the case for the Fiscal Year 2014 Budget.

One of the most startling facts about the Budget is the rosy economic projections made for taxes and other sources of government revenue. While the FY 2010 Budget projected a $512 billion deficit for FY 2013, the latest Budget predicts a $973 billion shortfall. Such billion-dollar deviations (90 percent higher) are not only cause for alarm but puts into question just how optimistic the President should be when putting together his trillion-dollar agenda.

On the spending side, which is the focus of the BillTally project, NTUF Director of Research Demian Brady and Policy Analyst Michael Tasselmyer found some peculiar proposals that might or might not add up. Overall discretionary spending falls by three percent up until FY 2016 BUT, when taking mandatory spending into account (the real source of federal spending), spending never decreases. How much? If this Budget was passed, taxpayers would be on the hook for $3.7 trillion this year and continue to grow to $5 trillion by 2021.

How does the Administration expect pay for more government? Increase taxes and expect the next President to cut spending. The estate tax, airline security fees, and the so-called "Buffett Rule" are just a few of the new costs imposed on Americans. Yet, it's hard to tell if all those new (and old) taxes would equal the projections outlined in the Budget. If deficit estimates were so off over the course of four years, how can more market distortions and public spending be accurately predicted for the future? Details and answers on NTUF's FY 2014 Budget analysis can be found here.

NTUF staff will also be highlighting other parts of the Budget in the following days here on Government Bytes, on Twitter (@NTUF), and in The Taxpayer’s Tab.

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Obama's FY 2014 Budget on Medicare
Posted By: Dan Barrett - 04/09/13

In part two of three, I take a look at the predictions of the President's FY 2014 Budget in how it might affect Medicare. Note: Figures are in ten-year windows (not the usual five-year increments under the BillTally project).

Current status: Via the Centers on Medicare and Medicaid Services (CMS), health care costs for disabled and senior Americans will continue to rise, so much so that the program could be insolvent by 2027. From 3.7 percent of GDP in 2011, the Medicare Hospital Insurance and Supplementary Medical Insurance Trust Funds will continue to grow in obligations to approximately 6.7 percent of GDP by 2086 (73 years from now). We're talking trillions of dollars in projected obligations that traditional funding methods, a mix of payroll taxes and regular government spending.

Possibilities for FY 2014:

  • Combine Medicare Parts A and B (Unknown). By putting many Medicare services under one category, beneficiaries would apply to a single entity, creating something of a unified deductible, and potentially decrease administrative costs. However, there does not seem to be hard figures and, like other reforms, transitioning to a new system might erase potential savings. Also, Parts A and B are funded in different ways, with A receiving payroll taxes whereas B is mostly funded by Federal general tax revenue. Hopefully the Administration will provide details on merging A and B, if such a proposal is included in the Budget.
  • "Rebates" from Drug Companies ($100 billion). In the previous Budget, President Obama called for drug rebates from companies, which would require makers to give a portion of their sales to the government. Some would argue this is a new tax on businesses, the rebates have been classified as "offsetting receipts" and so count as decreases in public spending.
  • Cut Hospital Payments ($23.6 billion). The government will cut hospital reimbursements for uncollected "bad debt" from patients. The intention is to make hospitals be more aggressive in collected unpaid bills from patients instead of relying on government compensation. While the Fiscal Times credited the measure as a $36 billion ten-year savings, the Congressional Budget Office scored the payment reduction as a $23.6 billion cut.
  • Encourage Efficient Care (Unknown). Depending on this proposal’s intention, the government aims to have fewer hospital readmissions (patients who are re-emitted soon after they are released). However, this measure is already in progress via the Affordable Care Act.
  • More Means-Testing ($35 billion). Many higher-income patients would be required to pay higher premiums and deductibles for the same medical care as average or below-average income patients.
  • The FY 2013 Budget continued the costly "doc-fix" measure but also made cuts to graduate medical education credits, quality care requirements for rural hospitals, and changed a number of specialized medical procedures that would have resulted in savings, totaling a potential $302.4 billion.

Bottom line: Even if all of the savings realized, the structural problems of Medicare outweigh many proposals, even ambitious ones. Though streamlining payment processes and taking more money away from drug companies could help to offset some current deficits, taxpayers need trillion-dollar solutions to the economy’s biggest single expense program. On the other hand, by requiring drug companies to pay more to the government, prescription prices may increase.

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Obama's FY 2014 Budget on Social Security
Posted By: Dan Barrett - 04/09/13

With budget fever gripping the Beltway policy world and state government inner circles, there are plenty of questions and skepticism on what President Obama's FY 2014 Budget will plan for the country's biggest expenses: government-subsidized health care and retirement entitlement programs. Though the budget is due to be released on tomorrow, some details have already come out on what taxpayers can expect and what this all means for the nation's bottom line. In an analysis by the Fiscal Times, many experts predict few surprises and many repeat proposals from the Obama 2013 Budget. I examine Social Security in the first of three posts. Note: Figures are in ten-year windows (not the usual five-year increments under the BillTally project).

Where it's at: According to the Social Security Administration, the regular retiree program has run a deficit (i.e. its expenditures are higher than the Trust Fund's non-interest receipts from withholding taxes) for the past two years and will continue upwards at an annual average of $66 billion between 2012 and 2018. The budgetary outlook could worsen. Deficits will likely increase sharply as the Baby Boomer generation enters retirement and the pool of workers expected to shrink, relative to reitrees. Jagadeesh Gokhale of the Cato Institute says that the disability portion of Social Security is the real worry because more people have been applying, which has mounted budgetary pressure, so much so that the program may default on benefits by as early as 2016.

What the budget might do:

  • Institute Chained CPI ($130 billion):  By changing how cost-of-living adjustments is calculated for retirees, future payments would likely not be as high as projected as compared to traditional determinations. The change could also push taxpayers into higher tax brackets earlier than expected (a revenue boom for the program but a bust for workers). The concept does have some opponents including the AARP, many Congressional Democrats, and experts who support other options.
  • The FY 2013 Budget also listed a few smaller efforts that could result in a net $3 billion savings, though most of that is improving collections of information on state and local pensions, which may end up costing more than it saves.

For better or worse? Much of the focus is not on Social Security but on the other two big programs. This is likely a timely issue where Social Security is seen as at least momentarily solvent and will stay that way long after Medicare is expected to default. Chained CPI and the already proposed measures may temporarily help guarantee retirees benefits for a longer period of time but the program will eventually need serious reform and, like all of these programs, the sooner sustainable reforms occur, the less it will cost taxpayers. However, none of this addresses the disability portion of Social Security, which would need a bailout in a very short amount of time.

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The Late Edition: April 9, 2013
Posted By:  - 04/09/13

Today’s Taxpayer News!

NTU recently joined Citizens Against Government Waste and a host of GOP senators in supporting Senator Marco Rubio’s REFUND Act. Read the full story from The Shark Tank.

This National Review article looks at the Senate’s budget proposal, and concludes the numbers just don’t add up.

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Obama's FY 2014 Budget on Medicaid
Posted By: Dan Barrett - 04/09/13

In this final post, I delve into what President Obama's FY 2014 Budget might do to Medicaid funding. Note: Figures are in ten-year windows (not the usual five-year increments under the BillTally project).

Program update: Using Congressional Budget Office data, the Kaiser Commission on Medicaid and the Uninsured projects an average eight percent spending increase for each of the next ten years, which is mostly due to the program’s expansion under the Affordable Care Act. Like Medicare, Medicaid costs are also expected to up-tick with many recipients getting older and requiring more costly care more often. So, in the short run, Medicaid and CHIP (the children's version of Medicaid) spending will increase by $638 billion before FY 2023.

What’s projected:

  • Eliminate Pay-For-Delay Drug Agreements ($753 million): Currently, drug companies are incentivized to pay generic drug makers to not reproduce their patented drugs for years at a time so that the company who created the drug gets compensated for research, development, and marketing costs. Possibly resulting in savings to Medicaid and even Medicare, President Obama would cut these agreements.
  • Expand Program Integrity (Unknown): In late 2012, the Government Accountability Office analyzed options for eliminating duplicative programs and improving efficiency under the Centers for Medicare and Medicaid Services (CMS). GAO found that an estimated $21.9 billion of Medicaid in FY 2011 expenditures were improper. Though the government should be fighting waste, fraud, and abuse, it is unclear how much more spending would be allocated to enhance integrity programs that are already in effect.
  • Empower the Independent Payment Advisory Board ($3.1 billion): Since its creation in 2010, IPAB has not yet made recommendations to change health care spending but CMS is tasked with starting IPAB’s work this year. In the past, the Congressional Budget Office has cited that the Board could save tax dollars but also said that the savings projections are "extremely" uncertain but maintains that the Board would save $3.1 billion over ten years.
  • The FY 2013 Budget called for the eventual reevaluation of payments made to Disproportionate Share Hospitals and a phased down provider tax credit threshold, among other smaller provisions. All told, these other measures could total $51.6 billion over ten years.

What this means: Given the Affordable Care Act’s broad expansion of Medicaid, it is difficult to say whether these reforms would mean real savings for taxpayers or if they could even stem the tide of high costs that are likely to occur. The Fiscal Times credited these three measures with a $25 billion savings but they are uncertain, conditional, and perhaps overly optimistic. Just as with Medicare, the full amount of savings do not make up for the projected growth in outlays and more fundamental reform (or revenue increases) are required.

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Halfway There: A Mid-Year Budgetary Review
Posted By: Michael Tasselmyer - 04/07/13

Six months into Fiscal Year 2013 (which began on October 1, 2012), the Congressional Budget Office (CBO) released its "Monthly Budget Review" on Friday with some comparisons showing how the United States' fiscal situation looked at this point last year.

Through March, CBO projected a 6-month deficit nearly $178 billion less than was recorded at the same point last year. The projection is largely due to an increase in tax revenues -- total outlays are only projected to be $46 billion less than in 2012, but revenues were $132 billion higher. Individual income tax receipts jumped 14.7%, while a combination of tax hikes on some income brackets, and the expiration of the payroll tax cut in January lead to an $85 billion increase in tax receipts withheld from workers' paychecks.

cbo fy13 halfway revenues

Federal outlays were about 2.5 percent lower over the first half of Fiscal Year 2013 compared to the first half of Fiscal Year 2012. At $315 billion, defense and military spending saw about a 6 percent decrease compared to the $335 billion the government had spent at the halfway point last year. Within the broad "Other Activities" category, relief efforts in the wake of natural disasters such as Hurricane Sandy and severe drought conditions lead to an increase in outlays at the Federal Emergency Management Agency and Department of Agriculture, respectively. These were offset by a decrease in payments to Fannie Mae & Freddie Mac, and a decrease in TARP funding.

Overall, spending decreased slightly in some areas. However, major entitlement programs such as Social Security, Medicaid, and Medicare all saw growth in payments of at least 5 percent. Increased tax revenues still seem to be driving any modest deficit reduction seen so far.

cbo fy13 halfway outlays

As the April 15 individual income tax filing deadline nears, the IRS reported a decrease in the number of tax returns it had received compared to this point last year.

Interestingly, nonwithheld receipts of individual income taxes were $14 billion higher than at the same point last year. CBO attributed that increase to taxpayers shifting income they otherwise would have received in 2013 to late 2012 instead, in order to avoid paying higher tax rates effective at the start of the new calendar year.

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The Late Edition: April 3, 2013
Posted By:  - 04/03/13

Today’s Taxpayer News!

NTU’s Brandon Arnold discusses corporate tax reform and the one year anniversary of the U.S. having the highest corporate tax rate of any industrialized nation. Read the full story in the Washington Times.

The State of California’s taxing and spending approach to budgets is catching up with it --- to the tune of a nearly $23 billion dollar deficit for fiscal year 2011-2012, according to the Sacramento Bee.

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Made It in America, Government Gives You Millions
Posted By: Dan Barrett - 03/29/13

Throughout the last two years of budget negotiations, debt ceiling fights, and the supposedly economy destroying sequestration, legislators have pointed to government grants as an easy way to cut down on spending. Yet indiscriminate across-the-board cuts in one form or another have occurred without eliminating what many Americans feel are real cases of government waste. Here’s just one government grant that we could do without: the Department of Commerce’s Make it in America Challenge.

From a 2012 summary, $40 million of federal tax dollars will be made available to levels of state and local governments as well as nonprofit organizations in the form of up to 15 projects, each at $4 million maximum allotments. Grants will be used to “encourage insourcing, either through on-shoring of productive activity by U.S. firms, fostering increased foreign direct investment, or incentivizing U.S. companies to keep their businesses and jobs here at home, as well as train local workers to meet the needs of those businesses.” Funds will be provided through the existing budgets of:

  • Economic Development Administration (Department of Commerce);
  • National Institute of Standards and Technology Extension Partnership (Department of Commerce);
  • Employment and Training Administration (Department of Labor);
  • Rural Community Advancement Program (Department of Agriculture); and
  • Rural Business Opportunity Grant Program (Department of Agriculture)

The Make it in America Challenge would also accept additional appropriations from Congress, which would likely require new spending. However, as the program is set up, budget outlays would not increase.

Many problems can come out of having the government pay for businesses to re-shore or pay to prevent those firms from leaving the country. Living in Ohio for years, I saw this first hand. Companies were given tax or other deals to stay in the Buckeye State but when the terms expired, the companies responded to incentives and expected an equal or better deal to remain in the state. When the state could’t or refused to comply, the company left for a better business environment (sometimes for better deals, more consistent or lower tax rates, or more competitive labor markets). In other words, the act of giving individual businesses (at times, picking winners & losers) results in unintended consequences that left the state worse off.

Now, potentially expand Ohio’s example to the entire nation. Some companies could not afford to leave for better fiscal pastures (think your local hair stylist or car mechanic) but with e-commerce expanding fast, many corporations would leave or threaten to leave without a government handout. This is not an example of businesses, or even capitalism, being evil. It’s a situation where people seek scarce resources and jump on opportunities. We all do the same thing picking store brand canned goods because of the lower price or use a coupon to get $10 off an oil change.

What would be better is to allow companies to move about freely (domestically or internationally) to encourage greater tax competition and competitiveness across all boarders. That starts with having a freer marketplace. By allowing firms to succeed and fail because of their own choices and workers to have earned success by taking less out of their paychecks, the economy will grow and erase the need for government handouts. Plus, saving $40 million is no small feat.

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The Late Edition: March 27, 2013
Posted By:  - 03/28/13

Today’s Taxpayer News!

Lee Schalk spoke out against the planned $250 million Columbia Pike streetcar system at the Arlington County budget hearing last night. Read more form the Clarendon Patch.

ObamaCare just gets better. According to HuffPo, the law will cause medical claims costs to jump an average of 32% per individual policy.  

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The Late Edition: March 25, 2013
Posted By:  - 03/25/13

Today’s Taxpayer News!

Pete Sepp weighs in on the Budget Control Act and Congress’s seeming inability to stick to meaningful spending reductions in this Townhall piece. 

The Fiscal Times explains some of the budget gimmicks being used to hide true costs to taxpayers in both the House and Senate budgets.

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