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Now North of $1.3 Trillion Dollars
By Children’s Home Society of Florida Foundation
The federal fiscal year for 2010 concluded on September 30th. The Office of Management and Budget and Department of Treasury have released the official figures for fiscal year 2010. The deficit was $1.294 trillion.
Geithner Speaks
Treasury Secretary Tim Geithner noted that the cost of the financial rescue of banks and automotive companies was lower than expected. He stated, “By carefully managing the emergency initiatives to stop the financial panic and by accelerating our exit from those investments, we have significantly lowered the cost to taxpayers, bringing the costs of the financial rescue down by more than $240 billion this year.”
TARP
The Troubled Asset Recovery Program (TARP) cost to Treasury was $9 billion in 2010. During this year, the Federal Government also spent $52.6 billion to support the housing industry through troubled lenders Freddie Mac and Fannie Mae.
Deficit Concerns
The deficit declined slightly from 10% in 2009 to 8.9% of the 2010 gross domestic product (GDP). Tax receipts for 2010 were $2.16 trillion or 14.9% of the economy. Government expenditures were $3.45 trillion or 23.8% of the economy. Senate Budget Committee Ranking Minority Member Judd Gregg (R-NH) expressed concern about this deficit and noted, “These abrupt and shocking changes in our fiscal situation cannot be dismissed as “inherited” problems when the tally of the majority’s spending spree has climbed into the trillions.”
Assessment
The Fiscal Commission appointed by President Barack Obama is developing a plan to reduce the deficit. The target for the Fiscal Commission is to reduce the current 8.9% GDP deficit down to 3% of GDP within five years.
Editor’s Note: Your editor and this organization take no position with respect to the many financial and tax options that are available to Congress. This information is offered as a public service to our readers.
Conclusion
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Filed under: Accounting, Experts Invited, Financial Planning, Funding Basics, Taxation | Tagged: Children's Home Society of Florida Foundation, Fannie Mae, federal deficit, Freddie Mac, Judd Gregg, TARP, Tim Geithner, Troubled Asset Recovery Program, US deficit |
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Follow-up on Taxes and Lame Ducks
Following the election on November 2, 2010, Congress will reconvene in a lame duck session on November 15th. A prime topic for the lame duck session will be taxes – income, capital gain and estate taxes.
What direction will the Congress take? The House will convene with the current Democratic and Republican members. Speaker Nancy Pelosi (D-CA) has repeatedly supported extending the middle-class tax cuts first passed in 2001 and 2003, but increasing the 33% and 35% brackets to 36% and 39.6%. This increase would affect single persons with incomes over $200,000 and married couples with incomes over $250,000.
In an interview on October 22nd, Vice President Joe Biden indicated that the Administration may be open to negotiation with Congress during the lame duck session. The White House continues to favor a permanent extension of tax cuts for middle-income individuals. However, several Democratic Senators have suggested that a compromise might include an extension of all of the current tax rates for 2011. Vice President Biden noted, “We’re open to speak to the Republicans, if they really mean it, if they are talking about deficit reduction, if they’re willing to move.”
The Senate may change in membership immediately after the election. The new Senators elected in West Virginia, Illinois and Delaware will immediately replace the existing Senators due to the rules on vacancies. As a result, the votes needed to pass legislation in the Senate could change. Under Senate rules, 60 votes are required to pass permanent tax cuts.
The items that commentators consider to be “must pass” bills include an AMT patch or exemption for 2010 and the tax extenders bill.
Source: Children’s Home Society of Florida Foundation
Editor’s Note: In the lame duck session, it is difficult to foresee the exact course of action. Because there remain significant differences between the White House, Speaker Pelosi, Majority Leader Reid (D-NV) and the Republican Senators, it is still possible there could be a Senate deadlock on income and estate taxes. If the Senate deadlocks, Congress may defer action on the income tax and estate tax until 2011. However, most observers are hopeful that a compromise in both areas can be passed during the lame duck session.
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CBO Director Urges Fiscal Restraint
Congressional Budget Office Director Douglas Elmendorf spoke on November 19th at the National Tax Association Annual Conference in Chicago. He responded to inquires about the economic recovery and the potential for additional stimulus.
Elmendorf stated, “To avoid a worsening of fiscal outlook, any policies that widen the budget deficits in the near term would need to be accompanied by specific policies to reduce spending or increase revenue over time.”
The CBO Director noted that there is a basic disconnect between the amount of taxes that are being paid and the government services that are being rendered. He continued, “A permanent extension of the tax cuts combined with the budgetary pressures posed by the aging of the population and rising costs for healthcare would put federal debt on an unsustainable path.”
Elmendorf continued to suggest that it is important for Congress to face the deficit issues and begin to enact specific laws to resolve the problem.
Editor’s Note: The deficit and taxes are foremost on the minds of everyone in Washington this week. Congress is discussing the potential for a compromise on extending the tax cuts. The President and Democratic leaders continue to advocate extension of middle-class tax cuts and an increase in tax rates for the top two brackets. Republican leaders from the House and Senate prefer a two-year extension of all of the existing tax rates.
Source: Children’s Home Society of Florida Foundation
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House Rules Focus on Budget
On January 5th the House Republican Majority adopted new rules on House operations. The rules were adopted on a vote that generally followed party lines with 240 in favor and 191 opposed. Under the new House rules, there is a “cut as you go” budget requirement. This provision requires any new spending proposal to be offset by a comparable reduction in an existing program.
House Majority Leader Eric Cantor (R-VA) supported the measure and stated, “By passing this rules package, we will take a significant step in the right direction.”
House Budget Committee Chair Paul Ryan (R-WI) echoed that statement and noted, “It’s a good day because we’re bringing some fiscal sanity back to this institution.” One of the rules permits Rep. Ryan as Chair of the House Budget Committee to set spending ceilings. This will permit him to set some budget limits without a full House vote.
Democratic leaders objected because while spending is addressed under the new rules, tax cuts do not require a comparable reduction or offset. Budget Committee Ranking Minority Member Chris Van Hollen (D-MD) stated that not including tax cuts resulted in “a fiscally reckless blueprint and the American people deserve better.”
Democratic Whip Steny H. Hoyer (D-MD) also opposed the rules and noted, “There are two ways to create debt: you can buy things and not pay for it, or you can simply cut revenues and make yourself unable to pay for things.”
Source: Children’s Home Society of Florida Foundation
Editor’s Note: Your editor and this organization do not take a specific position on these rules. Because the debate over the budget will have impact on all Americans, this information is offered as a service to our readers.
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