A recent study by the Women’s Philanthropy Institute finds that women are much better givers than men
As President Barack Obama unveils his plan for the coming year’s federal budget, he confronts a revenue stream that is the weakest its been in decades.
With the recession’s legacy dragging down payrolls and with a federal deficit ballooning, the Obama administration is trying to accomplish two difficult tasks: jump-starting economic growth while simultaneously cutting spending.
Federal tax revenue, measured as a percentage of economic output, is the lowest it has been since the mid-1970s, according to a new report from Credit Suisse. That figure, 15.1 percent, is slightly recovered from what it was during the recession, but it’s still more than two percentage points below the 50-year average of 17.5 percent. In mid-2009, when the economy had been shrinking, tax revenue was the lowest it had been in at least half a century.
“There were very severe job losses and income losses associated with the recession,” said Neal Soss, chief economist at Credit Suisse and an author of the report. “If you don’t have income, then you don’t have tax revenues.”
Obama’s proposed budget, which outlines cuts to programs that help the working poor and the middle class, reflects a move to trim the federal deficit, which has reached a record high. Currently, federal expenditures outpace revenue by more than $1.3 trillion. The White House expects that figure to increase beyond $1.5 trillion in the coming year.
The nation cannot simply grow its way out of debt, Atlanta Fed president Dennis Lockhart said last week, according to Reuters. As the government continues to borrow money to pay for its obligations, lawmakers and economists worry that accumulating too much debt could harm the economy.
“What I am concerned about is the structural imbalance between taxes and spending, which means the U.S. government is out there borrowing hundreds of billions of dollars every year,” said Gus Faucher, an economist at Moody’s Analytics. If interest rates rise, he added, “it’s going to make the government’s problem even worse.”
Much of the tax drought stems directly from the recession. On the state and local level, the real estate slump has strained government budgets, as property tax collection in some cases has fallen. In cities across the nation, governments have had to slash spending to compensate.
But on the federal level, it’s the jobs crisis that has taken a devastating toll on revenue. As nine percent of the workforce is unemployed, and as millions more workers have given up looking for jobs, fewer employees are paying personal income taxes. Since the December 2007 peak in revenue, this taxpayer base has dropped by about 7 million workers, the Credit Suisse report notes.
Moreover, a drop in personal tax revenue accounts for about two-thirds of the total decline in tax revenue since the recent peak.
“The economy is a lot smaller than it ought to be, given the capacity to produce,” said Gary Burtless, a former Labor Department economist and a current fellow at the Brookings Institution, in Washington. “There’s an automatic decline in the revenues going to the federal government.”
Even as some sectors of the economy show signs of recovery, U.S. companies have demonstrated continued reluctance to hire workers. Apparently padding their defenses against future losses, corporations are hoarding cash to a historic degree. In the third quarter of last year, corporations increased their cash holdings 7.3 percent, setting a new record with $1.9 trillion in liquid assets, according to Federal Reserve data.
Relative to their short-term liabilities, U.S. corporations haven’t been sitting on this much cash since 1956. In a speech this month before the Chamber of Commerce, the nation’s most powerful business lobby, president Obama urged the business world to use that money to increase payrolls, encouraging businesses to “get in the game.”
Coupled with a lackluster employment situation, the recent series of tax cuts has further eroded revenue. After two pieces of tax cut legislation were passed during George W. Bush’s first term as president, Americans received a tax rebate in 2008. Under president Obama, most Americans saw their taxes shrink in 2009, and again in 2010. In less than a decade, a budget surplus turned into a trillion-dollar deficit.
These tax cuts inflicted a revenue drop that was “above and beyond those tax reductions that would have occurred just because the economy shrank,” Burtless said.
With the economy in the grips of recession, dwindling corporate revenues also affected federal tax income. Wounded bottom lines translated into depreciated taxes, contributing about 28 percent of the drop in tax revenue, the Credit Suisse report notes.
As the economy recovers, these sources of revenue will likely improve. But a robust economy on its own might not be enough to resolve the deficit.
“The long-term budget problems require massive spending cuts. There’s no other way around them,” Glen Hubbard, dean of Columbia University Business School, said. “You couldn’t raise taxes enough to cover that, without completely killing the economy.”
A court in Ecuador fines US oil giant Chevron a reported $8bn (£5bn) for polluting much of the country’s Amazon region.
After winning over Congress in the midterm elections, Republicans said they understood that the American people want jobs. Since the midterm election, the Lame Duck session and the swearing in of the new 112th Congress on January 5, 2011, there has not been one single jobs bill to be introduced by our new Republican Congress. Instead, the Republican Congress has been busy introducing bills to end health care reform, end health insurance for pre-existing conditions, and change the definition of rape and other unrelated job measures. From the beginning, Republican legislators made clear that they went to Washington to undo things instead of going to do things.
Back when the Republicans were campaigning, they constantly talked about jobs, jobs and jobs. But, since starting on January 5, 2011, the Republicans have done nothing to create jobs. Republicans held votes on 11 bills and not a single one of those votes created a single job for a single American. Senate Minority Leader Mitch McConnell declared on February 12, 2011 that President Obama’s legislative agenda is “over” but said the GOP is willing to work to do what they “think is right for America.” With no jobs on their agenda, so far, it appears that Republicans must now think jobs are wrong for Americans.
Assistant Democratic Leader Rep. James Cylburn (D. SC) says:
I come from a district and a state where unemployment is unacceptably high and too many people have been out of work for much too long. I honestly wish the Republican majority would focus on commonsense, pragmatic ways to create American jobs. If they decide to do this, they will find me a willing partner. But let’s stop these shenanigans like we’re seeing today.
Last week, Democratic Congressional Campaign Committee ( “DCCC”) started the website WhenAreTheJobs.com to count the days that are running without a jobs bill being introduced. And last week, Republicans introduced a spending bill that would reduce the number of police on the streets. That eliminates jobs instead of creating them. The new Republican Congress has also focused on an extreme anti-choice agenda. They have gone from trying to re-define rape to allowing hospitals to refuse abortion care to women who will die without it. Politicians want to make government smaller by making it “just small enough to fit inside our bedrooms and our medicine cabinets” says NARAL Pro Choice America President Keenan. So bottom line is the Republicans, who campaigned on jobs and keeping government smaller, are failing to live up to their promise.
Everyday citizens cannot just stand idly by waiting for our lawmakers to introduce jobs. We have a democracy and must work towards making it work for Americans. There is no greater priority than getting Americans back to work. We are still a government of the people, by the people and for the people. We must be the change that we want.
On the issue of jobs, we should be non-partisan and united together. That’s the lesson of the Egyptian revolution. In the words of one online comment, we need to be out on the streets and not return until we get our legislators to address jobs. We need to be the Egyptians now right here in the United States. Progressives held the One Nation rally for jobs and education in October, 2010 and then quietly went home. Jon Stewart held the nonpolitical Rally for Sanity. We need an organized and peaceful rally focused on the jobs issue. Then, we need to take it to the airwaves, the Internet and our legislators’ offices on Capitol Hill. We have democracy and freedom of speech and peaceful assembly, yet some now take it for granted. Many Americans have become passive in their civic engagement. With peaceful assembly, freedom of speech and televised coverage, Dr. Martin Luther King and civil rights supporters helped to bring about the passage of the Voting Rights Act. Now more than ever, we need to take action to bring about the jobs and social change we need.