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Decisions, Decisions
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Press Release

Decisions, Decisions

This Week – Both the House and Senate took Monday off for the observance of Yom Kippur. They expect to hit the ground running on Tuesday when the Senate resumes consideration of H.R. 5093, The Interior Appropriations Act. They will also continue to debate H.R. 5005, The Homeland Security Act, which the President has repeatedly asked for before the November elections. The House will consider legislation that would block states from restricting interest rates on rent-to-own transactions (H.R. 1701) and legislation to make the repeal of the estate tax permanent.

09/17/2002
Stand Down Mode
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Press Release

Stand Down Mode

The Republican staff director of the House Appropriations Committee announced on Monday that the House of Representatives was in a “stand down” mode. Congress is just over two weeks away from its scheduled final adjournment, and not one of the annual appropriations bills has been sent to the president. The Senate hasn’t even passed a budget resolution. And they are in a “stand down” mode?

09/17/2002
Like Monkeys With Darts
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Like Monkeys With Darts

BY Jason M. Thomas

When George W. Bush was sworn in as the 43rd president of the United States, the Congressional Budget Office [CBO] estimated the federal budget for fiscal 2002 would be in surplus by an eye-popping $405 billion. Last week, the CBO issued its latest estimate for 2002: a $157 billion deficit. In just more than 19 months in office, President Bush has overseen a $552 billion swing in the 2002 budget and an estimated $7 trillion deterioration of the federal government's 10-year fiscal outlook. Such a reversal of fortune is staggering and could be a political liability for the president's party in this November's midterm elections. Democrats have been quick to blame the Bush tax cut for the deficits, but according to the CBO figures, only $74 billion, or 13.5 percent of the accounting change is attributable to the tax cut. Increases in discretionary spending [14.1 percent] - some of it to finance military reprisals to the September 11 attacks - and the economic downturn [17.8 percent] both dwarfed the fiscal effect of the tax cut, as Republicans will be sure to point out on the campaign trail. But, as math majors have already discovered, the aforementioned economic and legislative developments account for less than 50 percent of the change in the overall budget. The biggest factor in the dramatic reassessment has been what the CBO calls "technical changes," completely unrelated to any federal policy. The CBO describes these changes as adjustments to economic and tax policy assumptions, which is a nice way of saying their estimates were just plain wrong. This should not be surprising. Budget estimates are exceedingly difficult to make, even for the next year. In addition to unreliable forecasts of economic activity, federal budget estimates must rely on speculation about how much tax revenue such activity can be expected to yield. Stock market observers often joke about how the average analysts' stock picks are no better than if a monkey were to throw darts at the newspaper's financial pages. To get a sense of the reliability of CBO estimates, spin the monkey three times beforehand. As John Barry of the Tax Foundation points out in a recent memo, the CBO's March 1997 prediction for the 2002 deficit was much more accurate [$188 billion] than the estimate made just last year. Mr. Barry argues, sensibly, that "federal deficit estimates are no basis for tax policy," as "margins of error of 50 percent or greater are typical." Voters should be wary when politicians treat speculative forecasts of volatile budgets as gospel. Instead, policymakers should use more reliable estimates and hard numbers whenever possible. For instance, when determining the appropriate level of taxation and spending, instead of looking to unreliable budget estimates lawmakers should consider the relationship between federal tax receipts and spending to gross domestic product [GDP]. President Bush's tax cut was not good policy because CBO calculations estimated a $5.4 trillion surplus over 10 years; it was good policy because federal tax receipts had grown to 20.3 percent of GDP, a peacetime record. It was this dramatic growth in taxes relative to the economy - not sound fiscal management as some would have us believe - that led to the budget surpluses of recent years. While it is true that a $290 billion deficit in 1992 was turned into a $236 billion budget surplus in 2000, federal spending grew more than 35 percent during that time and was only held that low because the 1995-96 conservative Republican majority was willing to shut down the government to keep growth below 2 percent for a single fiscal year. Budget estimates will never be abandoned because they can serve a useful purpose. The U.S. Treasury needs a sense of how much bonded debt it must issue to cover federal spending and can use deficit projections when deciding what type of debt to issue and how much to make available for auction. But in the hands of opportunistic politicians, budget projections can be a dangerous, albeit misleading, rhetorical weapon. The CBO does as good a job forecasting deficits and surpluses as any private or public economic research group in the country, but it would be nice if politicians included the same disclaimers as CBO when using its numbers. Of course, this will not happen until politicians eschew distortion as a political weapon, an outcome about as likely as this year's CBO forecast for the 2012 budget deficit. Jason M. Thomas is a staff economist at Citizens for a Sound Economy Foundation.

09/12/2002
A Tough Row to Hoe
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A Tough Row to Hoe

This Week. Both the House and Senate resume legislative business this week after a month-long August recess. The Senate, which reconvened on Tuesday, will focus on legislation to create a Department of Homeland Security, S. 2452 and the 2003 Interior appropriations bill. The House, which does not begin work until today (9/4) has eight bills to be considered under suspension of the rules, a dam safety measure (HR 4727), a measure to make permanent various education tax breaks included in last year's big tax-cut package and motions to go conference on two spending bills. On Friday, both Houses will be conducting a special meeting in Federal Hall in New York, New York in remembrance of the victims and the heroes of September 11, 2001. A Tough Row to Hoe This will be a tough couple of weeks for legislators. Looming over them is the November 5th election currently only 8 short weeks away. Despite their best efforts to the contrary, any decision or legislation they undertake will be rife with the underlying politics. It is impossible to separate the two – with an almost evenly divided Senate and a single digit majority in the House – there is too much at stake.

09/04/2002
Monkeys With Darts
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Press Release

Monkeys With Darts

When George W. Bush was sworn in as the 43rd President of the United States the Congressional Budget Office (CBO) estimated that the federal budget for fiscal year 2002 would be in surplus by an eye-popping $405 billion. Last week, the CBO issued its latest estimate for 2002: a $157 billion deficit. In just over 19 months in office, President Bush has overseen a $552 billion swing in the 2002 budget and an estimated $7 trillion deterioration of the federal government’s 10-year fiscal outlook.

09/04/2002
Numbers to Make Your Head Spin
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Numbers to Make Your Head Spin

In “The Road Not Taken” poet Robert Frost ponders at a fork in the road and whether or not to choose ’the one less traveled.’ It has always been assumed that this ‘less traveled’ road was the choice for innovators and leaders - for who else would have the temerity to take the road less traveled with all of its pitfalls and potential dangers? Congress now finds itself at a fork in the road. Will they take the more traveled road of more spending and bigger government? Or will they take the less traveled road of fiscal discipline?

08/28/2002
Time to Get Serious About the Economy
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Press Release

Time to Get Serious About the Economy

© 2002 Copley News Service, 8/21/2002 The White House put on a much ballyhooed Economic Forum in Waco, Texas, last week, involving 250 hand-picked "experts" and "average Americans" with the stated purpose of discussing "where our economy stands, the impact of policies we put in place and the steps we are taking." How disappointing that not a single supply-side economist was there -- not Art Laffer, David Malpass, Richard Rahn, Larry Kudlow, Bruce Bartlett, Gary Robbins, Steve Entin, David Gitlitz, Dr. Robert Mundell or Dr. Judy Shelton.

08/21/2002
The President Leads
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Press Release

The President Leads

President George W. Bush took another important step last week in defining who he is and what he will fight for. It was the kind of bold move that will be talked about for years after he has left the presidency. He placed principle ahead of politics – which is pretty close to a man bites dog story these days.

08/20/2002
A Conversation with a Conservative
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A Conversation with a Conservative

I have had two very different running conversations this year. The first is with inside-the-beltway Republican politicians. They tell me things are going fine and they’re doing the best they can. The other conversation has been with conservative activists all across America. They tell me how bad things look. They say it appears the politicians don’t care about freedom anymore.

08/14/2002
No Economic Security Without Economic Growth
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No Economic Security Without Economic Growth

© 2002 Copley News Service, 7/30/2002 Dear Mr. President:

07/30/2002

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