Latest news with #deficits
Forbes
3 days ago
- Business
- Forbes
Three Ideas To Boost Economic Growth And Reduce Government Deficits
NEW YORK - NEW YORK - JUNE 1: A man walks near the National Debt Clock in Midtown Manhattan on June ... More 1, 2023 in New York City. (Photo by Eduardo Munoz Alvarez/VIEWpress) The federal budget is a mess, with federal debt held by the public at $29 trillion and counting. States cannot print money and borrow the way the federal government can, but some of them still have deficit problems. Maine, California, Colorado, and New York are just a few of the states facing large deficits over the next few years. Fortunately, there are policy reforms both the federal government and state governments can implement to boost economic growth and reduce deficits. In a recent National Bureau of Economic Research (NBER) paper, economists Douglas Elmendorf, Zachary Liscow, and R. Glenn Hubbard examine several policies with the potential to increase economic growth and reduce deficits. The general idea is that increasing total factor productivity (TFP)—the primary driver of economic growth—increases incomes and thus tax revenue. If this can be done in a way that does not involve too much government spending (or revenue losses) then the higher tax revenue would lower the deficit. Using estimates from the Congressional Budget Office (CBO), the authors calculate that increasing TFP by 0.5 percentage points each year for the next decade would reduce the federal budget deficit by 1.2% of GDP and make debt held by the public around 12% of GDP lower than it otherwise would be. The authors discuss seven policies in their paper, but I am going to focus on the three that seem to have the most potential. And while the paper focuses on the policies' impacts on federal deficits, the same growth effects would also impact state budgets. The first policy idea is making it easier to build housing. Economists know land-use regulations that restrict the supply of housing—including minimum lot sizes, parking requirements, and prohibitions on apartments, duplexes, and other forms of multi-family housing—make housing more expensive. As the authors explain, reducing the cost of housing construction would lead to more housing being built, which has downstream impacts on the demand for appliances, furniture, carpet, decks, and all the other things that make a house a home. The increase in housing construction and the production of complementary products would directly increase GDP all else equal. In addition to this direct effect, more housing in the most productive cities would make it easier for workers to move to take higher paying jobs. A few studies estimate that this mobility effect would increase U.S. GDP by roughly 8%. New residents also have a significant impact on state budgets. A recent report from the National Taxpayers Union Foundation shows that adding new residents can increase a state's revenue by billions of dollars. For all these reasons, it is a good idea for policymakers to reform regulations so we can build more housing in the places people want to live. State and local governments control most of the regulations that restrict the supply of housing. Over the last several years, many states have implemented reforms to make it easier to build, including Montana, Florida, California, and Arizona. This year, Texas passed several laws that will make housing more affordable in the Lone Star state. Other states should adopt and build on these reforms. A second and related idea discussed by Elmendorf, Liscow, and Hubbard is permitting reform for construction projects. In recent years, long permitting times have gotten more attention, and for good reason. Federal laws like the National Environmental Policy Act (NEPA) can delay projects for years. A recent report from the Council on Environmental Quality, which oversees agency implementation of NEPA, found that 61% of environmental impact statements still take more than two years to review despite a law specifying a two-year deadline. Clearly, we need more changes at the federal level. States have permitting problems, too. Earlier this year, wildfires destroyed thousands of homes in Los Angeles County. California governor Gavin Newsome promised to fast-track permitting so families could rebuild and get on with their lives. Five months later, only 33 building permits have been issued and not one house has been rebuilt. This is unacceptable for a country as wealthy as the United States. Long permitting times increase project costs since money is tied up in resources—land, equipment, and buildings—that are not generating returns. As the authors note, shortening permitting times would accelerate projects already underway as well as increase the number and size of future projects by increasing the return on investment. And since reforming regulations and processes typically does not require a lot of government spending, the growth we create by shortening permitting times is likely to help bring down government deficits. A third idea to boost economic growth and help reduce government deficits is immigration reform. Allowing more foreign workers with advanced degrees in science, engineering, and math to live and work in America would increase U.S. innovation and productivity. The NBER study calculates that a one-time increase of 200,000 additional high-skill immigrants would reduce debt held by the public as a percent of GDP by 2% after thirty years. Adding more high-skilled immigrants every year instead of just a one-time increase would have a larger effect. In addition to increasing innovation and productivity, immigrants have a direct effect on government deficits. High-skill immigrants, like high-skill natives, have a positive effect on government budgets on average since they pay more in taxes than they consume in government services such as welfare benefits or Social Security. One study estimates that over a decade we could reduce federal deficits by $25 billion per 100,000 additional people who come to America to work. Another recent report from the Committee to Unleash Prosperity (CTUP) also makes the case for more immigration to increase growth. The basic formula for economic growth is to add workers and make workers more productive. The U.S. fertility rate is falling, and without a sudden rebound the best way to add workers will be through immigration. From 2013 to 2023 about half of the growth in the U.S. civilian labor force was due to immigrants, as shown in the figure below (red bar). Without immigration, U.S. labor force growth would slow and eventually turn negative. Labor force growth Immigrants also tend to be incredibly entrepreneurial. According to the CTUP report, nearly half of all Fortune 500 companies were founded by foreign-born or second-generation Americans. These immigrants and their children create jobs for native-born workers in addition to the valuable new goods and services their companies create for consumers. Federal policymakers should reform our immigration system so more high-skill immigrants can create and grow their companies in America. Government budgets throughout the United States are a mess. From cities such as Chicago to the Halls of Congress, policymakers struggle to keep spending in line with revenue. Economic growth cannot solve all these budget problems, but it can help. Policy changes that make it easier to build housing, reduce permitting times, and increase immigration would boost output, incomes, and tax revenue. If we could get government spending under control, too, we would have a real shot at fixing our debt problem.
Washington Post
6 days ago
- Business
- Washington Post
To fix the national debt crisis, Republicans need to raise taxes
There is a great deal of chatter about the staggering federal debt, service on that debt and ballooning deficits but little analysis about what to do about it all. I find that the discussion is too much about ideology and not enough about the data that ought to be driving arguments.
Yahoo
18-06-2025
- Business
- Yahoo
Trump tax bill would widen deficits by $2.8T after factoring in economic impacts, CBO says
WASHINGTON (AP) — President Donald Trump's tax cuts package would increase deficits by $2.8 trillion over the next decade after including other economic effects, according to a fuller analysis of the House-passed measure released Tuesday by the Congressional Budget Office. The report, produced by the nonpartisan CBO and the Joint Committee on Taxation, factors in expected debt service costs and finds that the bill would increase interest rates and boost interest payments on the baseline projection of federal debt by $441 billion. The analysis comes at a crucial moment as Trump is pushing the GOP-led Congress to act on what he calls his 'big, beautiful bill." It passed the House last month on a party-line vote, and now faces revisions in the Senate. Vice President JD Vance urged Senate Republicans during a private lunch meeting Tuesday to send the final package to the president's desk. 'We're excited to get this bill out,' said Senate Majority Leader John Thune afterward. Tuesday's report uses dynamic analysis by estimating the budgetary impact of the tax bill by considering how changes in the economy might affect revenues and spending. This is in contrast to static scoring, which presumes all other economic factors stay constant. The CBO released its static scoring analysis earlier this month, estimating that Trump's bill would unleash trillions in tax cuts and slash spending, but also increase deficits by $2.4 trillion over the decade and leave some 10.9 million more people without health insurance. Republicans have repeatedly argued that a more dynamic scoring model would more accurately show how cutting taxes would spur economic growth — essentially overcoming any lost revenue to the federal government. But the larger deficit numbers in the new analysis gave Democrats, who are unified against the big bill, fresh arguments for challenging the GOP position that the tax cuts would essentially pay for themselves. 'The Republican claim that this bill does not add to the debt or deficit is laughable, and the proof is in the numbers," said Sen. Jeff Merkley of Oregon, the top Democrat on the Senate Budget Committee. 'The cost of these tax giveaways for billionaires, even when considering economic growth, will add even more to the debt than we previously expected,' he said. Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget, said Tuesday on social media that considering the new dynamic analysis, 'It's not only not paying for all of itself, it's not paying for any of itself.' Treasury Secretary Scott Bessent and other Republicans have sought to discredit the CBO, saying the organization isn't giving enough credit to the economic growth the bill will create. At the Capitol, Mehmet Oz, who heads up the Centers for Medicaid and Medicare Services and joined Vance at the GOP Senate lunch, challenged CBO's findings when asked about its estimate that the bill would leave 10.9 million more people without health care, largely from new work requirements. 'What will an American do if they're given the option of trying to get a job or an education or volunteering their community — having some engagement — or losing their Medicaid insurance coverage?' Oz asked. 'I have more confidence in the American people than has been given to them by some of these analyzing organizations.' Republicans on the Senate Finance Committee unveiled their proposal Monday for deeper Medicaid cuts, including new work requirements for parents of teens, as a way to offset the costs of making Trump's tax breaks more permanent in their draft for the big bill. The Senate's version of the package also enhances Trump's proposed new tax break for seniors, with a bigger $6,000 deduction for low- to moderate-income senior households earning no more than $75,000 a year for singles, $150,000 for couples. The proposals from Senate Republicans keep in place the current $10,000 deduction of state and local taxes, called SALT, drawing quick blowback from GOP lawmakers from New York and other high-tax states, who fought for a $40,000 cap in the House-passed bill. Senators insisted negotiations continue. Bessent said Tuesday that the Senate Republican proposal for the tax cuts bill 'will deliver the permanence and certainty both individual taxpayers and businesses alike are looking for, driving growth and unleashing the American economy.' 'We look forward to continuing to work with the Senate and the House to further refine this bill and get it to President Trump's desk,' he said in a news release. While the House-passed bill exempted parents with dependents from the new Medicaid work requirements, the Senate's version broadened the requirement to include parents of children older than 14, as part of their effort to combat waste in the program and push personal responsibility. The work requirements 'demonstrate that you are trying your hardest to help this country be greater,' Oz said. 'By doing that, you earn the right to be on Medicaid.' The CBO separately released another analysis on the tax bill last week, including a look at how the measure would affect households based on income distribution. It estimates the bill would cost the poorest Americans roughly $1,600 a year while increasing the income of the wealthiest households by an average of $12,000 annually.
Associated Press
17-06-2025
- Business
- Associated Press
Trump tax bill would widen deficits by $2.8T after factoring in economic impacts, CBO says
WASHINGTON (AP) — President Donald Trump's tax and budget bill would increase deficits by $2.8 trillion over the next decade after including other economic effects, according to a more fulsome analysis of the measure released Tuesday by the Congressional Budget Office. The report, produced by the nonpartisan CBO and the Joint Committee on Taxation, factors in expected debt service costs and finds that the bill would increase interest rates and boost interest payments on the baseline projection of federal debt by $441 billion. Tuesday's report uses dynamic analysis by estimating the budgetary impact of the tax bill by considering how changes in the economy might affect revenues and spending. This is in contrast to static scoring, which presumes all other economic factors stay constant. The CBO released its static scoring analysis earlier this month, estimating that Trump's bill would unleash trillions in tax cuts and slash spending, but also increase deficits by $2.4 trillion over the decade and leave some 10.9 million more people without health insurance. Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget, said Tuesday on social media that considering the new dynamic analysis, 'It's not only not paying for all of itself, it's not paying for any of itself.' The analysis comes at a crucial moment as Trump is pushing Congress, where Republicans have majority control, to send the final product to his desk to become law by the Fourth of July. Treasury Secretary Scott Bessent and other Republicans have sought to discredit the CBO, saying the organization isn't giving enough credit to the economic growth the bill will create. Republicans on the Senate Finance Committee unveiled a proposal Monday for deeper Medicaid cuts, including new work requirements for parents of teens, as a way to offset the costs of making Trump's tax breaks more permanent in draft legislation unveiled for his self-described big, beautiful bill. The first House proposal on the new Medicaid work requirement exempted parents with dependents. But the Senate's version broadened the requirement to include parents of children older than 14, as part of their effort to combat waste in the program and push personal responsibility. The proposals from Republicans keep in place the current $10,000 deduction of state and local taxes, called SALT, drawing quick blowback from GOP lawmakers from New York and other high-tax states, who fought for a $40,000 cap in the House-passed bill. Senators insisted negotiations continue. Bessent said Tuesday that the Senate Republican proposal for the tax cuts bill 'will deliver the permanence and certainty both individual taxpayers and businesses alike are looking for, driving growth and unleashing the American economy.' 'We look forward to continuing to work with the Senate and the House to further refine this bill and get it to President Trump's desk,' he said in a news release. The CBO separately released another analysis on the tax bill last week, including a look at how the measure would affect households based on income distribution. It estimates the bill would cost the poorest Americans roughly $1,600 a year while increasing the income of the wealthiest households by an average of $12,000 annually.
Washington Post
09-06-2025
- Business
- Washington Post
The White House's through-the-looking-glass budget spin
'OMB just reviewed the new CBO score of the One Big Beautiful Bill. It confirms what we knew about the bill at House passage. The bill REDUCES deficits by $1.4 trillion over ten years when you adjust for CBO's one big gimmick — not using a realistic current policy baseline. It includes $1.7 trillion in mandatory savings, the most in history. If you care about deficits and debt, this bill dramatically improves the fiscal picture.'
