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Home :  Federal Budget & Tax : 
Federal Budget & Tax:      News     Blog     Background    



Thursday, July 24, 2008

Minimum Wage Increases Minimally

The federal minimum wage will increase to $6.55 per hour today, the second bump that is part of a law passed last year to increase the wage to $7.25 by next summer (see this story in the Atlanta Journal-Constitution). As the AJC correctly points out, the increase will have a significant impact in Georgia, but for more than half the states, it won't do much because the federal government is woefully behind the curve:

Yet in 30 states, Thursday's change is a yawner: They already have higher wage floors — the highest being California and Massachusetts at $8 an hour and Washington at $8.07 an hour.

In Georgia, the new floor matters: About 210,000 Georgians work for the minimum wage, according to a 2006 study by the Georgia Policy and Budget Institute. About 461,000 others, while making a little more than the minimum, would also likely get a boost because of the change, the GPBI said.

For a full-time worker, Thursday's $28-a-week raise would mean a year's pay of $13,624. That is below the official poverty line for a family of three — and about one-third of the Georgians affected by the change are parents, according to the GPBI.

Nationally, it is estimated that 2.1 million workers will receive a long-overdue pay increase today, but for a family of three, a minimum wage earner will still be well below the federal poverty line.

Related Articles:
OurFuture.org: The Next Minimum Wage Fight
Jonathan Tasani: The Minimum Wage: A Disgrace and a Scandal
EPI: Guide to the Minimum Wage



Posted by Adam Hughes, 01:17:18 PM



Tuesday, July 22, 2008

JEC Ranking Member Highlights Troubling Trend in Income Inequality

Joint Economic Committee ranking member Jim Saxton (R-NJ) musters moral fibre to stand up for the downtrodden richest one percent among us to lament the growing burden that increasing shares of income are placing upon this voiceless group. It's true: According recently-released IRS data, while the richest one percent of taxpayers (as measured by adjusted gross income) saw their share of income grow from 20.8 percent to 22.1 percent from 2000 to 2006, they also saw their share income taxes climb from 37.4 to 39.9 in that same time.

Meanwhile, those lucky duckies in the bottom 50 percent of income earners -- those earning less than $31,987 -- had their share of the tax load lifted. From 2000 to 2006, when they saw their share of income decrease from 13.0 percent to 12.5 percent, those earners in the lower half of the income distribution were sticking it to the upper half as they reduced their share of the overall income tax burden from 3.9 percent to 3.0 percent.

Fear not, one-percenters! You can look forward to a lighter income tax burden after Thursday, when the minimum wage skyrockets to $6.55. It won't be long before they catch up to your average hourly income of $660 and share equally in your tax burden.


(click to enlarge)


Posted by Craig Jennings, 03:11:55 PM



Thursday, July 17, 2008

Average Earnings Down for All Workers, Median Earnings Also Down for Full-Time Workers

The Bureau of Labor Statistics has issued a pair of data sets indicating that workers are still not seeing real (i.e. inflation adjusted) increases in pay.

Yesterday's Real Earnings report, based on data from the payroll reports of private nonfarm establishments of earnings of both full-time and part-time workers holding production or nonsupervisory jobs, shows:

Real average weekly earnings fell by 0.9 percent from May to June after seasonal adjustment...Average weekly earnings rose by 2.8 percent, seasonally adjusted, from June 2007 to June 2008. After [adjusting for inflation], average weekly earnings decreased by 2.4 percent.

Today's release of data on full-time workers, based on a "survey of households in which respondents are asked, among other things, how much each wage and salary worker usually earns," also reflects a weak economy:

Median weekly earnings of the nation's 107.1 million full-time wage and salary workers were $719 in the second quarter of 2008....This was 4.2 percent higher than a year earlier, compared with a gain of 4.4 percent in the Consumer Price Index for All Urban Consumers (CPI-U) [i.e. inflation] over the same period.


Posted by Craig Jennings, 10:44:15 AM



Tuesday, July 15, 2008

Growth Nonetheless

President Bush today:

The growth [of the economy] is lower than we would have liked, but it was growth nonetheless.

GDP is not the only thing that is growing.


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Posted by Craig Jennings, 01:47:51 PM



Friday, July 11, 2008

State Budget Problems Cause Economic Hardship

The Center on Budget and Policy Priorities has once again released an analysis of state government budget health, and the news continues to deteriorate. In their lastest analysis, they rank all 50 states according to changes in three main economic indicators - employment, poverty, and housing foreclosures. The report finds:

States across the country have projected budget shortfalls totaling at least $48 billion for 2009. To meet their balanced budget requirements, they are being forced to raise taxes and/or cut expenditures — both of which reduce overall demand and thereby weaken the impact of the recent federal stimulus package. Federal fiscal relief would limit the need for such actions.

CBPP argues pretty convincingly that because the states that are showing the most economic problems are the same ones that are having budget issues, fiscal relief for state budgets would go a long way to improving econonmic conditions. Good stuff. Maybe Congress should consider this, huh?

CBPP: ECONOMIC DATA CAN BE USED TO TARGET STATE FISCAL RELIEF EFFECTIVELY



Posted by Adam Hughes, 03:37:57 PM



Monday, July 07, 2008

Fiscal Policy Agenda Returns to Washington

The Fiscal Policy Team and Congress both return to action this week with a number of fiscal policy issues to be tackled during the next five weeks. Below is a rundown of issues coming up soon, with most of the action happening in the Senate:

  • Debate continues between Senate Democrats and Republicans over whether to offset the cost of a popular package of tax breaks called the "extenders." The latest development is that Senate Republicans are now challenging Democrats to offset the cost of the package with spending cuts rather than other tax increases. BNA ($)
  • The Senate will also resume work on a bill to stave off a cut in payments to Medicare physicians by giving them the same reimbursement levels they had during the first six months of this year. Senate Republicans, who blocked legislation before the July 4 recess by one vote, have agreed to take up the legislation again this week after intense pressure from outside groups, particularly the American Medical Association. AMA Statement, AMA Television Ads
  • Legislation to help people hurt by the mortgage crisis was also blocked before the holiday recess by Sen. John Ensign (R-NV), who wanted to have an amendment added to the bill to give tax cuts to encourage the production of renewable energy. The Senate plans to take another crack at that bill this afternoon.
  • The appropriations season is well under way in Washington, but not much has been accomplished. With only about 10 weeks left until the start of the new fiscal year, neither the House nor Senate has approved any appropriations bills yet. After a old-fashioned temper-tantrum in the House appropriations committee before the July 4 holiday, prospects for completion of even one appropriations bill by Congress this year seems less and less likely.
  • Finally, the Government Accountability Office has a new report out showing the weapons systems currently being developed by the Department of Defense will cost an astronomical $1.6 trillion to complete, of which $335 billion will be needed in the next five years. Yikes! Washington Post



Posted by Adam Hughes, 03:00:13 PM



Friday, June 27, 2008

BudgetBlog on Hiatus for Holiday: Happy Fourth Everyone!

Happy Fourth of July!
Just wanted to let our loyal BudgetBlog readers know we're going on a short hiatus next week. With Congress heading out of town for a short summer recess and the upcoming Fourth of July holiday next week, the Fiscal Policy team is heading out of town in order to escape the heat for some well-deserved vacation. This means, though, that the BudgetBlog will be dormant next week.

But don't despair. Craig and I will return in one short week on July 7 to continue to bring you all the news, gossip, information, and analysis on federal fiscal policy you've come to expect.

Hope everyone has a safe and festive Independence Day next week - be careful with those fireworks.



Posted by Adam Hughes, 06:09:19 PM



Thursday, June 12, 2008

House Passes UI Extension by a Two-Thirds Margin
What a Difference a Day Makes

Yesterday's suspension vote in the House to extend unemployment insurance benefits by at least 13 weeks fell short of the required a two-thirds supermajority by a mere three votes -- perhaps attributable to the eleven members who did not vote.

This afternoon, the House voted again on the proposal as a stand-alone bill and, guess what? It passed precisely by a two-thirds, i.e., veto-proof, margin.

As Speaker Pelosi mentioned in a statement following today's vote, the bill does not only help the nation's unemployed workers, but the rest of us:

Extending unemployment benefits has the potential to help the entire American economy. According to the Congressional Budget Office, it is one of the most cost-effective and fast-acting ways to stimulate the economy because the money is spent quickly. For every $1 spent on unemployment benefits generates $1.64 in new economic demand.

The measure passed with support from 49 Republican House members, who bolted the Bush line opposing the bill, contained in yesterday's veto threat.



Posted by Dana Chasin, 04:27:47 PM



Wednesday, June 11, 2008

The Solution to Growing Unemployment: Free Trade Deals?

Today, the Bush Administration issued a veto threat against H.R. 5794, the Emergency Extended Unemployment Compensation Act of 2008.

Please read the following and see if you can spot the non sequitur:

The Administration is deeply committed to continually fostering an environment where every American who wants a job has a job. The Administration believes the best way to help workers is to create an environment that encourages job creation and to promote effective job training. To accomplish these goals, the Administration urges Congress to create more opportunities for American exporters by passing the pending free trade agreements with Columbia, Panama, and South Korea, make permanent the President's tax cuts that will expire over the next two years, and reform and reauthorize the Trade Adjustment Assistance program and the Workforce Investment Act. The Administration looks forward to continuing to work with Congress to enact these important measures. However, the Administration strongly opposes H.R. 5749. If H.R. 5749 were presented to the President, his senior advisors would recommend that he veto the bill.

Oh, wait -- I think I get it. Those free trade agreements are with some pretty small countries with pretty small economies. In economies of small scale, the blessings of free trade really could make a difference with respect to unemployment...

... in Panama.



Posted by Dana Chasin, 02:31:34 PM



Monday, June 09, 2008

Military Wages

Congress has sent the president a bill that would, in addition to forcing free-riding federal contractors to pay payroll taxes, "allow soldiers receiving combat pay to have their money counted as income for the purposes of the Earned Income Tax Credit." (BNA email)

I realize that we blow a lot of cash on the military, but does it strike anyone as odd that some Americans getting shot at in a combat zone in service of their country are paid so little that they qualify for EITC?



Posted by Craig Jennings, 11:38:29 AM



Friday, June 06, 2008

Workers See Fewer Hours, More Weeks Unemployed

As Dana noted in this morning's daily report, the unemployment numbers released this morning were bad enough to put unemployment insurance (UI) benefits extension back in play for the domestic spending section of the FY 08-09 war supp.

But the past couple of weeks have seen the release of a couple of other data points that should increase concern among lawmakers that the U.S. labor force has come into sour times.

  • The number of continuing UI claims -- workers receiving UI benefits for more than one week -- has not been this high since March 2004. The number of continuing claims has been sharply increasing since Nov. 2007.


(click to enlarge)

  • On Wed. (June 4), the Dept. of Labor reported that productivity in the first quarter was increasing at an annualized rate of 2.6% -- a healthy number. But that number -- the economic output per unit of labor -- is the result of employers scaling back hours, making workers worse off.

It should also be noted that May's 49,000 net job loss was buoyed by the addition of 17,000 government jobs; the private sector lost 66,000 jobs, continuing a six-month decline in private jobs.


(click to enlarge)


Posted by Craig Jennings, 02:18:48 PM



Thursday, May 29, 2008

Five Years of Bush Tax Cuts, Another Five Years Increasing Inequality

When the Treasury Department released a stack of propaganda analyses yesterday on the 2001-2003 Bush tax cuts, they also promulgated a press release to accompany their reports. While their message was nothing more than years-old, warmed over talking points, it has provided yet another opportunity to talk about the continual deepening of income inequality in the United States.

The administration crows about the enormous burden of taxes that upper income groups shoulder, however, it remains typically silent on why they pay such a large share of taxes -- upper income groups earn way more than lower income groups.

From the Treasury's talking points we learn that the individual income tax is "highly progressive" because:

  • In 2005, the top 5 percent of taxpayers paid more than one half (59.7 percent) of all individual income taxes, and the top 1 percent paid 39.4 percent; and
  • Taxpayers who rank in the top 50 percent of taxpayers by income pay virtually all individual income taxes. In 2005, they paid 96.9 percent of all individual income taxes.

But what remains unsaid is the underlying reason for these numbers:

  • Taxpayers in the top 50% earned the overwhelming majority of income. In 2005 they earned 87.2 percent of all income, up from 86.2 percent in 2001; while
  • The bottom 50% has not fared as well. In 2005, they earned 12.8 percent of all income, down from 13.8 percent in 2001.


(click to enlarge)


(click to enlarge)



Posted by Craig Jennings, 06:21:55 PM



Friday, May 16, 2008

Unions Boost Wages of Lowest-Income Workers the Most

Shawn Fremstad posted yesterday on a new paper released this month by John Schmitt over at the Center for Economic and Policy Research. The paper studies the impact unions have on income and has some interesting findings:

Using national data for 2003 through 2007, we estimate that unionization raises the wages of the typical low-wage worker (one in the 10th percentile) by 20.6 percent, compared to 13.7 percent for the typical worker (one in the 50th percentile), and 6.1 percent for the typical high-wage worker (one in the 90th percentile). The traditional statistical approach applied to the same data produces an estimate of the average union wage premium of 11.9 percent, which is substantially lower than the union effect on low-wage workers (20.6 percent) and somewhat below the effect for the median- wage worker (13.7 percent).

Read the full report.



Posted by Adam Hughes, 03:32:21 PM



TPC Testimony Before Senate Finance Committee

The Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution, has published two tesitmonies from a recent Senate Finance Committee hearing on overhaul of the U.S. tax code:

A Blueprint for Tax Reform and Health Reform
Leonard Burman

In this testimony Burman outlines a plan for tax reform that would maintain progressivity, raise enough revenues to finance the government, and dovetail with plans to provide universal access to health insurance. The plan would combine a value-added tax (VAT) dedicated to pay for a new universal health insurance voucher with a vastly simplified and much flatter income tax.

Read the complete testimony

Individual Taxpayers and Federal Tax Reform
William Gale

In the next few years, several factors including the expiration of the bush Administration's tax cuts will push tax issues to the forefront of policy discussions. Gale's testimony focuses on some overarching principles that should guide tax reform efforts.

Read the complete testimony



Posted by Adam Hughes, 10:20:10 AM



Thursday, May 15, 2008

An Equal Opportunity Crisis

House Financial Services Committee chair Rep. Barney Frank -- profiled in the New York Times this week -- is the only person in Washington remotely both as bright and as indecipherable as Alan Greenspan. His accent is the aural equivalent of illegible handwriting. A stenographer should follow him around so you don't have to wait 'til the next day for the transcript.

Mr. Frank, who has deftly led the surprisingly challenging effort to pass comprehensive housing legislation equal to the crisis, made an off-handed remark, according to the Times profile, after the House approved his bill on Thursday, though without enough votes to override a veto:

Mr. Frank quickly went on the offensive, seeking to undercut the administration's argument that homeowners in trouble should have known better. "No dumb people got America into this problem," he snapped. "You had to be really smart to understand collateralized debt obligation derivatives."

Needless to say, the profile adds, "Mr. Frank, who holds degrees from Harvard and Harvard Law School, understands collateralized debt obligations." Of course, you don't have to have multiple Ivies to become ensnared in the current housing crisis.

In fact, as the Washington Post reports today, the crisis knows no class boundaries. "Nationwide, from 2006 to 2007, the number of foreclosed properties listed at $1 million or more rose 50 percent, to 7,642, up from 5,091, according to RealtyTrac. And the number of foreclosed homes priced from $500,000 to $999,999 jumped 88 percent, from 52,836 to 99,457."

Some of that's deep in GOP territory.

Maybe George Bush will re-consider his veto threat. He's got enough Ivy League degrees to understand the problem.



Posted by Dana Chasin, 11:34:12 AM




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