Support our online development, and advance our onground research initiatives in free market economics, as we seek to showcase the brightest Next-Gen minds.
THE ME-P DISCLAIMER: Posts, comments and opinions do not necessarily represent iMBA, Inc., but become our property after submission. Copyright © 2006 to-date. iMBA, Inc allows colleges, universities, medical and financial professionals and related clinics, hospitals and non-profit healthcare organizations to distribute our proprietary essays, photos, videos, audios and other documents; etc. However, please review copyright and usage information for each individual asset before submission to us, and/or placement on your publication or web site. Attestation references, citations and/or back-links are required. All other assets are property of the individual copyright holder.
A CBO Political Review
By Children’s Home Society of Florida Foundation
The nonpartisan Congressional Budget Office (CBO) is responsible for providing Congress with financial estimates for future budget and tax policies. CBO Director Douglas Elmendorf testified before the Budget Committee of the House of Representatives on June 6.
Elmendorf started by noting that the public federal debt for the past 40 years has averaged 38% of the economy. At the end of 2008, the public debt was 40% of gross domestic product (GDP). By the end of 2012, the public debt will be 70% of GDP.
Elmendorf pointed out that there are two major trends that will substantially impact the federal budget. First, there are 78 million baby boomers that will be retiring and receiving benefits from Social Security and Medicare. Second, the cost of healthcare for the past decade has been increasing more rapidly than the general inflation rate. He suggests that this increasing cost for healthcare is going to continue for the foreseeable future.
Elmendorf then offered two scenarios for the future. He called these the “baseline scenario” and the “alternative scenario.”
Baseline Scenario
The baseline scenario assumes that the current law will be applicable. On January 1, 2013, the existing tax cuts will expire. In addition to higher tax rates, many individuals will be subject to alternative minimum tax. Finally, the 3.8% tax under the Affordable Care Act will apply starting in 2013.
With the substantial tax increases under the baseline scenario, federal tax revenue increases to 24% of the economy by the year 2037. Elmendorf noted that this would be the highest level of taxation since World War II. Under this scenario, the increasing tax revenue permits debt to be reduced from the current 70% to 53% of GDP by 2037.
The alternative scenario assumes that Congress will follow the pattern of the past four years. The tax cuts enacted in 2001 and 2003 will be extended. The alternative minimum tax exemptions will be indexed. The $5.12 million applicable exclusion amount for gift and estate taxes will continue (with indexed increases in future years). Medicare payment rates for physicians will continue to increase. This last provision has been called the “Doc Fix” in Washington. Finally, federal budgets will continue with the same general provisions that exist today.
Under the alternative scenario, the increasing deficits lead to public debt of 90% of GDP by 2022. With the rising expenditures for the baby boom generation, the public debt increases to 200% of GDP by 2037.
Elmendorf Opines
Elmendorf noted that many economists believe that this large debt may lead to creation of fewer new jobs. He suggested that it will be necessary to increase revenue and decrease spending substantially from projected levels to avoid a large increase in the national debt. He did not specify how this should be accomplished.
Assessment
Chairman of the Federal Reserve Ben Bernanke also testified before Congress this week. He pointed out that January 1 is a “fiscal cliff” that could have great impact on the nation. Bernanke believes that the scheduled increase in taxes and reduction in spending should be spaced out over time to avoid a dramatic impact in January. However, he also declined to offer any advice on specific ways to increase taxes or cut spending.
Editor’s Note: These discussions in Congress are preparations for the legislative session that will occur following the November election. Congress is debating the combination of tax increases and budget cuts to pass this year. In addition, preparations are being made for a major tax reform act in 2013.
Conclusion
Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.
Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos
Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com
Our Other Print Books and Related Information Sources:
Health Dictionary Series: http://www.springerpub.com/Search/marcinko
Practice Management: http://www.springerpub.com/product/9780826105752
Physician Financial Planning: http://www.jbpub.com/catalog/0763745790
Medical Risk Management: http://www.jbpub.com/catalog/9780763733421
Hospitals: http://www.crcpress.com/product/isbn/9781439879900
Physician Advisors: www.CertifiedMedicalPlanner.org
Share this:
Filed under: Accounting, Taxation | Tagged: "Doc Fix", ACA, Affordable Care Act., Ben Bernanke, CBO, CBO Director Elmendorf on Debt and Taxes, COngressional Budget Office, GDP, SGR |
The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants 
Fiscal Cliff Defined
In August 2011, Congress and President Obama promised to find a way to reduce projected deficits by $1.2 trillion over 10 years. They passed a law that cuts spending across-the-board in January 2013 unless they agree to an alternative.
This date coincides with the expiration of a slew of tax cuts, meaning tax increases for nearly everyone. This is the so-called “fiscal cliff.”
Leonard
LikeLike
CBO Report on Fiscal Cliff
Senate Finance Committee Chairman Max Baucus (D-MT) asked the nonpartisan Congressional Budget Office (CBO) to review the impact of the expiration of tax cuts at the end of 2012 and the scheduled budget cuts for 2013. The total of the combined tax increases and budget cuts for 2013 is approximately $700 billion.
The CBO published a report on November 7 with the title “Economic Effects of Policies Contributing to Fiscal Tightening in 2013.” In the CBO report, if all of the scheduled tax and budget changes occur the economic growth for 2013 will be reduced by 0.5% and unemployment will increase from the current 7.9% to 9.1%.
The report shows the specific economic impact of several actions. It explains the change in potential economic growth and the number of jobs that are affected by each respective action.
Economic Impact in 2013
1. Tax or Budget Action
2. Growth Increase
3. Jobs Increase
1. Extend tax cuts for middle incomes.
1.3%
1,600,000
2. Repeal the budget cuts.
0.8%
800,000
3. Extend 2% payroll tax cut and unemployment ins.
0.7%
800,000
4. Extend upper income tax cuts.
0.1%
200,000
First, extending the tax cuts also includes an estate tax applicable exclusion amount of $5 million plus indexed increases and passing tax extenders such as the IRA charitable rollover. Second, the budget cuts change would repeal the 2013 sequestration of defense and Medicare funds and restore the scheduled 30% cut in payments to doctors providing Medicare services. The third section would extend the current 2% reduced payroll tax contribution. Finally, the fourth option would extend the current top 35% income tax bracket for single persons over $200,000 and married couples over $250,000 in income.
Chairman Baucus responded to the report and noted, “This report reaffirms the serious economic risk America faces if we fail to deal with the fiscal cliff. The consequences of inaction will deliver a dramatic, short-term blow to the economy. We need to build a bridge over this fiscal cliff.”
Chair of the House of Ways and Means Committee Dave Camp (R-MI) also reviewed the CBO report. He stated, “There is a better path forward than simply increasing tax rates, and one in which both sides can claim victory. We can address both our jobs crisis and our debt crisis by focusing on tax reform that strengthens the economy. There is bipartisan support for tax reform that closes loopholes and lowers rates.”
Finally, Speaker of the House John Boehner (R-OH) opened the door to potential tax increases. In an address on November 7, he stated, “For purposes of forging a bipartisan agreement that begins to solve the problem, we are willing to accept new revenue, under the right conditions.”
Source: Children’s Home Society of Florida Foundation
Editor’s Note: Speaker Boehner and President Obama spoke by telephone shortly after the election. Both are making public statements, but exercising caution to preserve flexibility in their negotiations.
LikeLike
Healthcare Looms Large as a Debt-Reduction Target in CBO Analysis
Federal healthcare programs were prominent targets in a new Congressional Budget Office analysis of debt-reduction options for policymakers expected to tackle that issue soon. The non-partisan CBO noted that without “significant changes,” federal healthcare spending is projected to continue growing much faster than the economy and the revenue necessary to pay for it. Specifically, an aging population is expected to accelerate growth of both Medicare and the long-term care services financed through Medicaid.
The report outlines healthcare cuts that would provide $420 billion in annual deficit reductions by 2020, or the bulk of the $750 billion the CBO offered as a goal of deficit-reduction talks expected to start in the final weeks of this year or early next year.
Source: Rich Daly, Modern Healthcare [11/9/12]
LikeLike