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I’m not sure what left the bigger impression on me after my visit with The Heritage Foundation’s Romina Boccia and Adam Michel—the awesome bigness of the federal government’s fiscal challenges or the mindsets of those we elected to deal with them.
The problem is enormous. The federal government spends $4 trillion per year. It takes in $3.3 trillion in taxes and fees and thus runs a deficit of about $650 billion. The national debt is $20 trillion—$15 trillion in publicly held debt and $5 trillion the government owes itself for its various trust funds, such as Social Security.
Two-thirds - Medicare - Medicaid - Social - Security—grows
Worse, two-thirds of the budget—mostly Medicare, Medicaid, and Social Security—grows on autopilot, and increases in these three programs will account for 85 percent of the increase in federal spending over the next 10 years.
But what is truly frightening is that Congress assumes in all its tax and budget projections that government will continue to grow at a fairly sustained rate and that any projected cuts in spending won’t ever actually happen.
Congress - Tax - Reform - Budget - Issues
When Congress considers tax reform or other budget issues, it can use one of two formulas to determine the impact of the proposals on taxpayers, governments, etc. They are known as the current law baseline and the current policy baseline.
The current law baseline means Congress goes by what the law says. In any given year, dozens of tax breaks that benefit various small constituencies are set to expire. The current law baseline assumes they will expire on schedule according to the current law. But they almost never expire because Congress bundles together all these individually small tax cuts and votes to extend them every year.
Policy - Baseline - Policy - Results - Tax
The current policy baseline acknowledges current policy results in the tax cuts being extended and evaluates tax and budget proposals using these real-world assumptions. The advantage to Congress of using...
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