Is the economy recovering from recession?
The state of the economy has become a kind of cliche lately, with most people bored of discussions of recession and stock market ups and downs. In fact, the economic downturn has been a buzz word for so long that comedians and talk show hosts are starting to turn their focus elsewhere — there’s simply not much material left to cover.
More news is popping up this week about the state of our nation’s finances. On Tuesday the White House and the Congressional Budget Office are set to release a series of new numbers related to the federal budget deficit and the relative health of the American economy. This is a big deal mostly because the Congressional Budget Office is considered the most non partisan of bodies related to budget reporting. The CBO is expected to release a slightly different estimate from the White House, but reportedly the numbers aren’t far enough apart to make a difference. The US national debt is reportedly around $12 trillion and climbing steadily.
President Obama and his cabinet have already released some preliminary numbers related to this year’s budget gap — $1.5 trillion or so. This number is down slightly from an earlier White house projection of nearly $2 trillion. As they say in Washington, a billion dollars here, a billion dollars there . . .
Back to the task at hand, how will these new economic forecasts play out? What impact will they have?
President Obama has made one thing clear — he does not intend to follow in the footsteps of previous Presidents who offered big tax cuts for Americans. The new economic data offered by Washington indicates that tax cuts for the wealthy may be even more unlikely. Those tax cuts, set to expire at year’s end, are stealing about $600 billion a year from the government and giving it to the American people. Think Obama is going to let that easy source of money slip away? No chance, not when he is forced to release news of some serious budget shortfalls in his first year in office.
Expect the usual rhetoric from Obama’s opponents on the political right — removing tax cuts will get Limbaugh and company complaining that our economic growth is in jeopardy down the road.
A good sign for the majority of us — Congress and the Executive branch will likely shield the poor from tax increases during these tough times. In fact, no matter how bad the coming economic forecast is, we aren’t likely to see a tax increase for anyone who doesn’t have a full-time job. Congress is set to provide another one-year quick fix for the Alternative Minimum Tax, a controversial option originally aimed at the upper classes. Because of inflation, the middle class is now within the range of the Alternative Minimum Tax, and Congress will make whatever repairs are necessary to protect the middle class, even though this protection costs the government about $50 to $70 billion a year.
Another move we might see from Congress — actions to squeeze whatever savings are possible from Social Security. Because this is a fairly unpopular idea, expect our elected officials to create a somewhat anonymous “commission” to do the dirty work for them. For several years now, members of Congress (both Democrat and Republican) have been trying to form just such a commission to look into the Social Security retirement program (as well as Medicare and Medicaid) for any chance at savings. What’s happening is that the population of the United States is aging and putting a huge drain on the Federal treasury — costing America as much as $55 trillion over the next three generations. This week’s White House and CBO economic reports, which will most likely forecast massive deficits for years and years to come, will pretty much give Congress the go ahead to form the commission necessary to find some savings. Oh, by the way, this commission will most likely suggest a few tax increases while they’re at it.
Another nasty side effect of new economic indications will be a big hit to President Barack Obama’s health care reform plans. Opponents of Obama’s plan say that while the American economy is in a state of recession (and now that we know that budget deficits are at record levels) the time couldn’t be worse for Washington to go after yet another expensive, unneccessary, and unconstitutional program.
President Obama for his part (and many of his fellow Democrats in Congress) have said time and again that any reform bill related to healthcare will be forced to “pay for itself”. How would this work? By claiming that the program will reduce the cost of the Medicare program or by raising taxes on the working Americans, Obama could fund the beginning of his sweeping health care reform. His critics, of course, indicate that raising revenue by these means should help America reduce the deficit and not be spent to expand available health insurance coverage.
If the economy should rebound, and many economists are suggesting that this is the case, President Obama and the Democratic led Congress will most likely attempt to hold back on defense spending to show America that they have some semblance of financial responsibility. However, if the economy keeps up its stagnant pace, we should see liberals start to push hard and heavy for another round of economic stimulus, regardless of the numbers from CBO and the President’s Office of Management and Budget.