FY 2007 Budget--Unfair, Untransparent & Irresponsible

The Center on Budget and Policy Priorities (CBPP) issued a preliminary report on the President’s FY 2007 budget that highlights the problems and omissions of the budget. The main problem in the budget is that it makes cuts that hurt low- and middle-income Americans while proposing new tax cuts and legislation making existing tax cuts permanent, both of which are designed so they predominantly benefit the wealthy. The budget proposes cuts in federal funding for Medicare and Medicaid, guts the COPS program (which provides federal funds to increase community policing) by cutting 79 percent of its funding, and cutting many other programs that help the poor, children and the elderly. Another problem the CBPP highlights is what is omitted from the budget: projections past 2011, funding for the wars in Iraq and Afghanistan, funding for hurricane Katrina rebuilding and the cost of reforming the Alternative Minimum Tax (AMT). Since the projections only extend until 2011 and many of the most expensive proposals the President has proposed or that has been enacted are designed to show little cost until 2011, with the bulk of the cost appearing conveniently after 2011. The CBPP writes:

Several of the additional tax cuts the Administration is proposing--including costly proposals related to health savings accounts and to retirement and lifetime savings accounts -- are designed in a way that their costs in the first five or ten years would be substantially smaller than their costs in subsequent decades, when they would lose huge amounts of revenue. The budget shows the Administration’s Health Savings Accounts proposals would cost a whopping $156 billion over ten years; the costs would be even higher in subsequent decades. Past analyses by the Congressional Research Service estimated that the Administration’s retirement and lifetime savings account proposals ultimately would cost $300 billion to $500 billion per decade (measured in today’s dollars).

On to Afghanistan, Iraq and Katrina reconstruction. The funding for the two wars have been consistently left out of the President’s budgets, as has the Katrina reconstruction in this year’s budget, with the funding paid for through supplemental appropriations. While the costs of the wars and reconstruction are not known, there is some level of funding that could be anticipated in the budget (with unexpected changes in cost picked up by supplemental appropriations). However, this would shred the President’s claim to cut the deficit in half by 2009, as would a fair accounting of the cost of AMT relief. The AMT was set up in the 1960s to make sure the super-wealthy paid some taxes, but the standard deduction was not indexed to inflation, and more and more middle-class Americans are becoming subject to the AMT and seeing their taxes increase. Currently, year-by-year, Congress passes AMT relief, but there has been no success in making a permanent solution or even incorporating the yearly AMT relief bills into the budget, despite the political necessity to pass AMT relief every year. The CBPP’s conclusion is short and straightforward:

Unfortunately, this budget fails the tests of fiscal responsibility, fairness and balance, and transparency. The nation and its policymakers can do better.