Posts tagged ‘Government spending’

September 2, 2011

Tax Cuts as a Form of a Spending Program

by Vince




The Republicans who loathe spending programs as a form of anti-Christian reliance in fact worship a program known as tax cuts, ironically a government program in itself:

The other way to look at these credits and deductions is that they’re essentially government spending programs in disguise. After all, if these deductions didn’t exist, then either the deficit would be smaller or everyone else could pay fewer taxes. A tax credit that subsidizes the construction of affordable housing is no different than an explicit grant to do the same thing.

In Washington, however, tax expenditures generally aren’t considered spending programs. They’re considered tax breaks. And, as a new NBER paper by Len Burman and Marvin Phaup details, this view has had enormously perverse consequences over the years. Politicians always prefer tax breaks to new spending programs. So Congress ends up enacting a disproportionate amount of social policy through tax credits and deductions, the paper said, and that, in the end, can actually lead to higher taxes and bigger government than would otherwise be the case.

Burman and Phaup found that total U.S. tax expenditures will amount to $1.2 trillion in fiscal year 2011. That’s much, much larger than non-defense ($671 billion) or defense ($744 billion) discretionary spending. In other words, there’s a huge pool of federal spending that Congress doesn’t even consider to be spending. As the authors noted, “excluding income tax expenditures causes spending to be understated by about one-third.”

(Pictured: the 10 biggest tax expenditure programs for fiscal year 2011)

November 24, 2010

The Mystery Behind Earmarks

by Vince

Jacob Levy slices into the brouhaha surrounding earmarks and the budget:

Earmarks aren’t themselves a lot of money in the grand scheme of things, and abolishing them entirely would only make a tiny dent in the deficit. But they do indeed affect appropriations– and my hunch is that they affect appropriations for more than their actual cash value, because they create a system that attracts appropriators like Byrd and Stevens, who err on the side of spending too much to make sure there’s enough to go around.

I tend to cringe when I hear from someone that the first thing they would suggest the government to cut is pork barrel spending (earmarks). Levy explains that they do have an affect on our budget, and in some cases they are utterly wasteful, but many of them are put to some good use and are light years away (in terms of the larger pie of government spending) from the holiest of holies: Medicare, social security, and defense spending.