Federal budget game!

I capped carbon emissions, covered everyone with health insurance and ended the Iraq War and still had money in the bank. How about you? See the game intro below or go to the Budget Hero website to play.



See my budget here

A 50 trillion debt? In dollars?

David Walker may have the un-sexy title of Comptroller General of the United States and head of the Government Accountability Office (GAO), but he knows budgets. I heard him speak on the fiscal fortunes of America this week and his 10-minute speech showed the power of high-content, compelling arguments. Walker argued that there are 4 deficits that government must address: budget, balance of trade, savings, and leadership (I'll discuss two).

Budget
The United States may have deficits of $400 billion and a debt of eight trillion, but right now it has unfunded liabilities of $50,000,000,000,000 - 50 trillion dollars. That's $440,000 for every household in the United States (and unlike your mortgage, there's no house to back it up).

What are unfunded liabilities? Money promised to Americans through Medicare, Medicaid and Social Security (entitlement programs) that the government has insufficient resources to pay for. That's $32 trillion in Medicare (parts A-C), $6.4 trillion in Social Security, and $8 trillion to the new Medicare prescription drug benefit.

Savings
For two years running, Americans have spent more money than they earned. The last time this happened was in 1933-34. As Walker noted, these were not good years for the U.S. economy.

Why is this a problem?

• It's a lack of stewardship. The baby boom generation is at risk of being the first generation to leave their children in worse shape than their predecessors.
• It's unsustainable. You simply cannot spend more than you earn every year. Eventually you run out of money.
  
• Increasing amounts of U.S. debt are held by foreign countries. If you don't understand how that could be a problem, see this excerpt from Wikipedia on the Suez Canal Crisis:

Part of the pressure that the United States used against Britain was financial, as President Eisenhower threatened to sell the United States reserves of the British pound and thereby precipitate a collapse of the British currency.

What can be done?

1. Reform the base Social Security program, preserving its use as basic social insurance (and probably raising the retirement age)
2. Add supplemental savings accounts on top, with an additional 2% payroll tax.
   
3. Adjust Medicare premiums so that recipients, particularly wealthier ones, have to put in more than the current 25% of expenses covered by premiums.
   

If you want to hear more on this topic, Walker will be appearing on the Colbert Report on Wednesday, April 25th.

Update 4/26: Here is the Colbert Report video

Congress: fiscal responsibility returns with the Democrats

With Democrats in control of both chambers of Congress, their Budget Committee chairman have both reinstated PAYGO rules, requiring any spending increases or tax cuts to be offset with increased revenue. The rules were originally enacted in the early 1990s but allowed to lapse by the Republican Congress in 2001.

There's a lot that can be said about the benefits of pay-as-you-go, but few words could be as valuable as this image:

Supreme Court: The EPA must regulate carbon

In a 5-4 ruling, the Supreme Court decided last week that carbon dioxide is a pollutant that should be regulated by the EPA. In addition to raising the possibility of federal policy on greenhouse gases, the ruling may also empower states such as California, which has moved on its own to regulate carbon dioxide.

Ultimately, the slow march toward carbon caps and climate gas regulation in the United States is likely to run headlong into American energy habits, particularly where cars are concerned. The Wall Street Journal has an April 5 article entitled "Horsepower Nation," noting that Americans still like a lot of power in their cars, despite the rising cost of gas and greater emissions:

Car makers are getting better at using technology to squeeze out more power without decreasing fuel efficiency. But environmentalists and government regulators criticize the industry for using technology -- such as more sophisticated fuel control systems -- to boost power instead of mileage...

...Mike Jackson, chief executive of AutoNation Inc., the nation's largest publicly traded dealership chain, says fuel efficiency has consistently ranked behind cup holders and sound systems in consumer desires over the past 20 years.

A couple thoughts come to mind at this:

1. Americans still don't grasp the full extent of the threat of global warming.
2. Public policy has to lead the market, since customers simply do not select for climate impact at the point of sale.

Update 2:38pm: the WSJ Energy Roundup has a nice summary of reactions to the Supreme Court decision.

IRS agrees to not compete with tax preparation services

A legal deal between the IRS and tax filing companies such as H&R Block explains why e-filing often involves shelling out part of that refund. Lower income folks (AGI less than $52,000) can get free federal e-file, but the corresponding state's e-file always costs extra. The IRS has explicitly agreed to not provide a free e-filing option for all taxpayers (despite the cost savings to the IRS) because of this deal.

Two things are disturbing. One, that a government agency can not only decide against providing a service, but can enter into a binding agreement not to (as opposed to Congress trying to prevent competition). Two, that the lawyer for the tax preparation companies threatened to paint the IRS as "Big Brother" if it ever decided to provide the e-file service.

Last time I checked, your social security number is not a mystery to the IRS.

Bush Budget: Less Health Care, More Wal-Mart

In keeping with tradition, President Bush's submitted budget proposes extensions of all his tax cuts, including a repeal of the estate tax (costly war, what?). Matt Taibbi of Rolling Stone excoriates the Bush plan, noting that the cuts to Medicaid - health care for the poor - are about the same as the bottom line boost to the Walton family, the Wal-Mart heirs.

That's right. Bush's budget would reduce funding to Medicare by $28 billion and guarantee a tax break worth $32 billion to the Waltons. Now that's what I call democracy!