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Post-election fiscal blues

Post-election fiscal blues. Dr. Karen Kunz Public Administration West Virginia University. Presentation. Sequestration The bigger picture Fiscal significance of election results Solution . Current Reve n ues. TOTAL: $ 2,435 billion. Source: CBO. Current Spending.

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Post-election fiscal blues

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  1. Post-election fiscal blues Dr. Karen Kunz Public Administration West Virginia University

  2. Presentation • Sequestration • The bigger picture • Fiscal significance of election results • Solution

  3. Current Revenues TOTAL: $ 2,435 billion Source: CBO

  4. Current Spending TOTAL: $3,563 billion Source: CBO

  5. Discretionary Spending 2012 Source: OMB

  6. Sequestration-taxes & revenues • Increase in individual income tax rates • < $50,000: $1,400-$1,800 • $50,000-200,000: $2,000-$5,000 • Rate changes: • Top: 35 – 39.6% • Middle Income: 28% - 31% • AMT: >$48,000 • Payroll tax increase • Reductions in deductions

  7. Sequestration-spending cuts Sarah Kliff, Wonkbook, 9/14/12

  8. Sequestration-economic impact Source: CBO GDP: drop 0.5% Unemployment: increase to 9.1% Market reaction? Credit rating decrease? Tax increases: greatly reduce deficit in short order

  9. Sequestration-how close are we? • Agreement: • Deficit cuts: $4 trillion over 10 years • Alternative to across the board cuts • Extend tax breaks to couples up to $250,000 and individuals up to $200,00 • Contention: • President wants $1.5 trillion in new revenue over 10 years through tax breaks for top 2% • House wants cuts to tax credits (mortgage, charitable giving deductions)

  10. Sequestration-ways to know they’re serious a framework next month that sets deficit-cutting targets for each of the next 10 years a fast-track process for passing next year's tax and spending bills if they meet the savings targets an enforcement mechanism that imposes savings automatically if lawmakers gridlock over details a January deal would allow Republicans to technically avoid violating the no-new-taxes pledge that most of them have signed because they would then be voting to cut taxes Politico, 11/24/12

  11. The debt ceiling Currently $16.4 trillion Will last until early 2013 Treasury’s extraordinary measures to prevent a breach of the limit: selling and buying bonds

  12. Funding federal government Current Continuing Resolution expires March 2013 Shifts control of budget back to Executive office - OMB Constant preparation for government shut-downs Reliance on funding priorities from last actual budget – 2009

  13. Current fiscal conditions • Public debt: $16.3 trillion • $51,984.57 per person • Deficit: $1.1 trillion • “Fixes” for fiscal cliff will counteract savings intended in sequestration • Challenge: effects of spending cuts on economic growth

  14. Significance of election results • More Democrats – women – in the Senate • Republican House • Stalemate 2.0? • Continued reliance on CRs • Inability to address debt, deficit, policy issues • Reduced aid to states

  15. Solution: public engagement Urban-Brookings Institute, http://www.brookings.edu/about/centers/taxpolicy Committee for a Responsible Federal Budget, http://crfb.org/ Bipartisan Policy Center, http://bipartisanpolicy.org/ West Virginia Center on Budget & Policy, www.wvpolicy.org Congressional Budget Office, www.cbo.gov Office of Management & Budget, www.omb.gov Wonkbook, Washington Post, http://www.washingtonpost.com/blogs/wonkblog/ House of Representatives, www.house.govSenate, www.senate.gov

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