America's Fiscal Constitution (77 page)

18
. Tax Policy Center, “Quick Facts.”

19
. Donald Rumsfeld quoted in Bacevich,
The Limits of Power
, 4.

20
. Campbell, Rockman, and Rudalevige,
The George W. Bush Legacy
, 175.

21
. Paul O’Neill quoted in Pollack,
Refinancing America
, 134.

22
. Greene and Hosler, “Bush Pushing for Fast Relief.”

23
. Frum,
The Right Man
, 213.

24
. Bush quoted in Tanner,
Leviathan on the Right
, 157.

25
.
Budget, Fiscal Year 2003
, 101.

26
. See OMB, Historical Tables. In 2002 dollars, adjusted for inflation, the administration requested $372 billion for fiscal year 2003, an amount much higher than the 1992–2001 average of about $310 billion annually in 2002 dollars. In nominal dollars, the administration requested $379 billion. When it took office, the administration projected a fiscal 2003 military budget of $334 billion in nominal dollars.

27
. CBO,
Budget: Fiscal Years 2003–2012
, Table 1.6 at 16.

28
. Ibid., 3.

29
. Ibid., 45.

30
. Greenspan,
The Age of Turbulence
, 235.

31
. Suskind,
The Price of Loyalty
, 291.

32
. In his memoirs, Cheney states that he was trying to put deficits “in context.” He then explained that the Reagan budget had created a “peace dividend . . . increased federal revenues and, eventually, lower deficits” (Cheney,
In My Time
, Ch. 10).

33
. “Taxes, Trade, Social Security and More.”

34
. Brownlee,
Federal Taxation
, 237.

35
. DeLay quoted in Surowiecki, “A Cut Too Far.”

36
. Snow quoted in Hormats,
The Price of Liberty
, 278.

37
. For an excellent overview of the initial planning for the war in Iraq, see Ricks,
Fiasco
.

38
. Maranto, Iansford, and Johnson,
Judging Bush
, 112.

39
. Thomas, Lee, and Lipton, “A Political History.”

40
. Ibid.

41
. Ibid.

42
.
2005 Annual Report
, 107–112.

43
.
2013 Annual Report, Federal Old-Age and Survivors Insurance
, 111.

44
. US Census Bureau, 2000 Census Summary File 1, and 2010 Census Summary File 1. Between 2000 and 2010, the population increased by 27.3 million. The number of Americans ages forty-five to sixty-four increased by 19.5 million.

45
. Boehner quoted in Greenspan,
The Age of Turbulence
, 243.

46
. DeLay quoted in Yarrow,
Forgive Us Our Debts
, 16.

47
. Peterson,
Running on Empty
, 82.

48
. Kent Conrad quoted in 108 Cong. Rec. (October 2, 2003), at 24036.

49
. See Hormats,
The Price of Liberty
, for an excellent analysis of the difference between budgeting for the wars in Iraq and Afghanistan and standard American practice in all previous wars.

50
. See Appendix C.

51
. See Appendix C.

52
. See Chapter 18, Chart 1.

53
. For tables summarizing House and Senate votes by party for selected years, see Schick,
The Federal Budget
, 223–227.

54
. See Appendix D.

55
. Lauback, “New Evidence on the Interest Rate,” 7. Later in the decade the Federal Reserve calculated that the spike in borrowing during the downturn pressed rates up by as much as an entire percentage point.

56
. Bureau of Labor Statistics, “Databases, Tables, & Calculators.”

57
. Bush, “Remarks by the President.”

58
. SSA,
2001 OASDI Trustees Report
, Table II.D3.

59
. The Greenspan Commission had anticipated the aging of the population and had slightly underestimated the positive impact of higher immigration on the trust fund. The perceived deterioration in the balance in the trust fund consisted of (1) the use of average wages rather than median wages to raise the annual limit on total wages subject to the tax and (2) a smaller increase in worker productivity than had been assumed between 1984 and 2004. See the excellent analysis in Bivens, “Social Security’s Fixable Financing Issues.”

60
. Quoted in Altman,
The Battle for Social Security
, 273 and 282.

61
. 108 Cong. Rec. (September 24, 2004), at 792.

62
. Obama quoted in Yarrow,
Forgive Us Our Debts
, xii.

C
HAPTER
18

1
. For statistics on distribution of wealth, see Fry and Taylor, “A Rise in Wealth for the Wealthy.”

2
. Council of Economic Advisers,
Economic Report
, 280.

3
. Herszenhorn, “Bush and House in Accord,” and Herszehorn and Stout, “$168 Billion Stimulus Plan.”

4
. The legislation allowed payments up to $600 for individuals with incomes of up to $75,000. Those numbers were doubled for those filing joint returns. Presidential candidate Obama opposed the plan. Economic research showed that Americans had also saved, rather than spent, cash distributions, called “tax rebates,” that were paid out of borrowed federal funds in 1975 and 2001. Former Reagan economic advisor Martin Feldstein, who originally supported the 2008 rebate plan, concluded later that Americans saved rather than spent money intended for consumer spending. See Feldstein, “The Tax Rebate.”

5
. Bernanke quoted in Wessel, “Inside Dr. Bernanke’s E.R.”

6
. Bush, “Speech on the Economic Crisis.”

7
. Herszenhorn, “Bailout Plan Wins Approval.”

8
.
Economic Outlook and Financial Markets: Before the Committee on the Budget, U.S. House of Representatives
, 110th Cong. (October 20, 2008) (statement of Ben Bernanke, Chairman of the Federal Reserve).

9
. Even Martin Feldstein, a conservative economist who had opposed large deficits when serving as President Reagan’s economic advisor, made the case for some combination of federal spending and tax cuts to put the brakes on the economic free fall (
www.project-syndicate.org/print/the-case-for-fiscal-stimulus
).

10
. Obama quoted in “Obama Fires Up House Democrats.”

11
. CBO,
The Budget Outlook, Fiscal Years 2009–2019
, 1.

12
. OMB, Historical Tables, “Table 1.4—Receipts, Outlays, and Surpluses or Deficits by Fund Group: 1934–2018.”

13
. Herszenhorn, “A Smaller, Faster Stimulus Plan.”

14
.
Budget, Fiscal Year 2010
, 117–120.

15
. The number of private sector jobs had dropped from the level a decade
earlier. For a comprehensive review of various stimulus measures, and their effects, see Blinder and Zandi, “Great Recession.”

16
. Compare Appendix A, Appendix C, and United States Census data.

17
. Obama quoted in Woodward,
The Price of Politics
, Ch. 3.

18
. Norquist,
Leave Us Alone
, Ch. 20, section titled “No One Votes on Total Spending.”

19
. Extrapolated from Logan, “Summary.”

20
. “Obama Makes Fresh Appeal.”

21
. Oliver, Lee, and Lipton, “A Political History,” 323. Those two types of “savings”—for Medicare payments and subsidies for Medicare Part C private plans—were estimated to total about a half a trillion dollars over a decade. Another $87 billion “savings” was simply an illusion. A new program was established for long-term care insurance programs, in which workers could pay premiums for long-term assisted care, which may be needed when they were elderly. In the early years of the program, premiums exceeded expenses, and these were counted as savings, despite the fact that the premiums were to be set at a rate determined by actuaries to cover no more than the cost. One of the most prominent “savings”—$57 billion over ten years—consisted of reducing payments by Medicare and Medicaid to hospitals that provide a disproportionately larger share of services to people with low incomes and no private health insurance. See CBO,
CBO’s Analysis of the Major Health Care Legislation
.

22
. Federal Reserve Board of Governors, “Press Release November 3, 2010,”
http://www.federalreserve.gov/newsevents/press/monetary/20101103a.htm
.

23
. Coy, “Credit and the Bernanke Code.”

24
. “Obama Signs Tax Deal.”

25
. Mascaro, “Budget Talks.”

26
. Hirschfeld-Davis, “‘Gang of Six.’” See also Bai, “Obama vs. Boehner.”

27
. CBO,
2011 Long-Term Budget Outlook
.

28
. Ungar, “New Data.”

29
. CBO,
CBO’s Analysis of the Debt Ceiling
.

30
. Ibid., Table 1.

31
. CBO,
Economic Effects
, Table 2 at 6.

32
. Nitti, “Secrets of the Fiscal Cliff Deal.”

33
. Congressional Research Service,
The “Fiscal Cliff”
, 4, 2.

34
. Rampell, “College Graduates Fare Well.”

35
. Bureau of the Census,
Historical Statistics of the United States, 1789-1945
, Series B 26-30 and B 31-39 at 25-26.

36
. Toossi, “A Century of Change.”

37
. See Chart 5 in Chapter 21 and its cited sources.

38
. Compare Reinhart and Rogoff, “Growth in a Time of Debt”; Kumar and Woo, “Public Debt and Growth”; and Greenlaw, Hamilton, Hooper, and Mishkin, “Crunch Time,” with Herndon, Ash, and Polin, “Does High Debt Consistently Stifle Economic Growth?”

39
. The 13.3 percent figure is derived from OMB, Historical Tables, “Table
1.4—Receipts, Outlays and Surpluses or Deficits by Fund Group: 1934–2018,” and “Table 10.1—Gross Domestic Product and Deflators Used in the Historical Tables: 1940–2018.” Note that these percentages differ slightly from those in Appendix C because percentages used in the appendices are for calendar years, for which estimates are available from 1789.

40
. Ibid.

41
. See notes on Charts 2 and 3.

42
. “Medical” includes federal funds contributions to the SMI Trust Fund (2011 Medicare Trustee Report) funding Medicare Plan B, Medicaid, CHIP, Other Mandatory Healthcare (OMB, Historical Tables, FY 2013 Table 8.5), and non-Medicare Discretionary Healthcare (OMB, Historical Tables, FY 2013 Table 8.7). It excludes Federal Employee Health Benefits and Veterans Health. “Base Defense” includes National Defense, International Security Assistance, and Veterans Benefits and Services (OMB, Historical Tables, FY 2013, Table 3.2) and is net of statistics on War. “War” is also known as “Overseas Contingency Operations” and is found in annual White House Defense Budgets as well as in CBO,
Budget: Fiscal Years 2012–2022
, 71, Box 3–2. ARRA (American Recovery and Reinvestment Act of 2009) funds are spread throughout various years, mostly 2009–2011, and 2011 estimates can be found in ibid., 8, Box 1–1. Figure excludes 2011 Medicaid contribution of $12 billion, as this is reflected in the Medical category. The Unemployment Benefits data found in OMB Historical Tables include trust fund monies. Data presented here reflects only 2011 federal funds payments to the Unemployment Trust Funds and is found in the OMB,
Analytical Perspectives of the White House Budget Fiscal Year 2013
, 247–248. Note: In 2005 there was a slight decrease in “other” spending relative to the growth in national income and 2000 spending.

43
.
2013 Annual Report, Federal Hospital Insurance
, Table V.B5 at 199.

44
. Ibid., and Table V. B1 at 191.

45
. See OMB, Historical Tables, Table 2.1. Other Federal Funds Taxes is derived from Federal Funds Receipts net of Personal and Corporate Income Taxes. Tables 1.4, 2.3, 2.4, and 2.5 give detail related to specific federal fund and trust funds receipts.

C
HAPTER
19

1
. Thomas Jefferson, letter to Treasury Secretary Albert Gallatin, April 1, 1802, in
Oxford Dictionary
, 206.

2
. Despite vast volumes of budget materials published by the Congressional Budget Office and White House Office of Management and Budget, the net federal funds annual interest expense is difficult to find in any accessible publication and must be recreated from ledgers. In 2011 the federal funds budget paid $453 billion in interest. After subtracting interest paid to various federal funds balances held by the Treasury, $45 billion, the net interest expense of federal funds was $418 billion. The unified budget distorts both interest payable on federal debt and the funds available for debt service. In 2011, at record low interest rates, federal interest
amounted to 29 percent of federal funds revenue. “Net interest” appears to be only 10 percent of revenues from the unified budget. OMB,
Historical Tables
, Table 3.2, Account 901, adjusted by interest paid as recorded in various US Treasury ledgers.