Spending & Budget

Spending & Budget

Research

Jeremy Horpedahl | Jan 14, 2016
Taxpayers who make contributions to approved charitable organizations can deduct those contributions from their income before computing their tax liability. In fiscal year 2014, the deduction lowered taxes by $47 billion, with over 93 percent of the benefits going to tax filers under the individual income tax rather than the corporate tax. Most taxpayers would benefit from removing the deduction and lowering tax rates since most taxpayers do not use the deduction regularly. The only economic justification for the deduction would be to encourage donations to organizations that provide public goods or quasi-public goods. It is unclear, however, that the charitable deduction actually encourages private sector provision of these goods.
Mark J. Warshawsky | Dec 10, 2015
A new study published by the Mercatus Center at George Mason University investigates more efficient partial annuitization strategies and the rule changes necessary to set these strategies on an equal tax basis with those favored by the Obama administration. The study uses historical simulations to demonstrate the efficiency of combining systematic withdrawals from a dynamically changing asset portfolio with the laddered purchase of immediate life annuities over an extended period of time. The study proposes steps regulators can take to make this genus of retirement strategy more attractive.
Jason J. Fichtner, Adam Michel | Dec 07, 2015
In an increasingly global economy, national governments are searching for ways to keep corporations from moving highly valuable intellectual property and associated economic activity to lower tax jurisdictions. In particular, governments are concerned with losing jobs, investment that fosters innovation, and the tax base attributable to income arising from intellectual property. One proposed solution is a patent box, also called an innovation box. A patent box lowers the rate of corporate income taxes paid on income originating from targeted intellectual property.
Jason J. Fichtner, Courtney Michaluk, Adam Michel | Dec 03, 2015
Over $2 trillion of US corporate profits have been systematically locked out of the US economy by an outdated tax system. One major symptom of the poorly designed worldwide corporate tax rules in the US is the rise of corporate inversions, where a domestic firm merges with a foreign firm and moves the new corporation’s headquarters abroad.
Brian Blase | Nov 19, 2015
A new study for the Mercatus Center at George Mason University examines the reasons behind the ACA exchanges’ failure to meet widespread expectations. The study explains the likely impact of this failure on health insurance prices and risk pool stability, bringing into question the law’s future prospects of survival without significant revisions.
Peter T. Calcagno, Edward López | Nov 12, 2015
A new study published by the Mercatus Center at George Mason University argues that, beginning late in the 19th century, the informal rules that govern fiscal policy began to reward policymakers for increasing spending—even for increasing it beyond the capacity of federal revenues, and therefore at the cost of chronic deficits. Despite numerous legislative attempts to constrain spending over the past 40 years, these informal rules have trumped formal constraints, and the deficit problem has marched steadily on.

Testimony & Comments

Veronique de Rugy | Feb 02, 2016
The heated rhetoric coming in March 2017 about whether Congress should raise the debt ceiling will obscure the federal government’s real problem: an unprecedented increase in government spending and the future explosion of entitlement spending has created a fiscal imbalance today and for the years to come. No matter what Congress decides to do about the debt ceiling, the United States must implement institutional reforms that constrain government spending and return the country to a sustainable fiscal position.
Jason J. Fichtner | Sep 30, 2015
Academic research and some anecdotal evidence suggests that the current budget rule of use it or lose it is not optimal and may be encouraging wasteful spending of taxpayer dollars. The question remains: If such spending is indeed wasteful, what can be done to reduce it?
David M. Primo | Jul 28, 2015
My three-part message today is this. First, Congress should treat the budget process as a means, not an end, and enact reforms accordingly. Second, given the fiscal challenges facing the country, now is not the time for minor tweaking. Instead, now is the time to think big and craft a process that drives legislators to produce credible and sustainable fiscal policy by constraining federal spending both today and tomorrow. Third, any reform should include effective enforcement mechanisms, preferably constitutional in nature, to prevent the new process from suffering the same fate as the current one.
Veronique de Rugy | Jun 02, 2015
Contrary to what you will hear from its supporters and beneficiaries, the Ex-Im Bank plays a marginal role in export financing—backing a mere 2 percent of US exports each year. The vast majority of exporters secure financing from a wide variety of private banks and other financial institutions without government interference or assistance. With US exports hitting record high levels, it is obvious that such financing is abundant and government assistance is superfluous.
Veronique de Rugy | Mar 24, 2015
Policymakers who are interested in supporting the entrepreneurs and companies that will deliver the next generation of energy supplies and products should focus their attention on correcting the federal government’s hostile tax climate and dispense with the futile hopes of outsmarting the marketplace.
Antony Davies | Jul 28, 2014
There are two important unintended consequences of raising the federal contractor minimum wage: first, it can adversely affect the most vulnerable workers; and second, the rule as currently stated could be enforced in a manner so that its impact would extend to far more businesses than originally intended.

Research Summaries & Toolkits

Veronique de Rugy, Jason J. Fichtner | Oct 10, 2013
As federal government borrowing is set to exceed yet another debt limit, most are quick to recall—and wish to avoid a repeat of—the 2011 debt-limit showdown. If current rhetoric is any indication, it appears many of the last debate’s lessons have been forgotten. Regrettably, it seems many of the debate’s facts have been forgotten as well.
| Sep 24, 2013
The Mercatus State Policy Guide is intended to summarize and condense the best research available on the most relevant topics. It’s a starting point for discussion, not a comprehensive overview of economic policy. Each statement is supported by academic research, with links provided in the endnotes. Mercatus scholars are available to further explain the results of their studies. We hope the guide will prove to be a valuable tool in your economic policy research.
| Jul 23, 2013
The Mercatus Policy Guide is intended to summarize and condense the best research available on the most pressing topics. It serves as a starting point for discussion, not a comprehensive overview of economic policy. Anyone who wants to go deeper into these studies should consult the references listed at the back. Mercatus scholars are available to further explain the results of their studies. We hope the guide will prove to be a valuable tool in your evaluation of economic policy.
Jason J. Fichtner, Jacob Feldman, Jeremy Horpedahl, Brandon Pizzola, Bruce Yandle, Veronique de Rugy | Jul 15, 2013
The most basic goal of tax policy is to raise enough revenue to meet the government’s spending requirements, preferably with minimal impact on market behavior. The US tax code has long failed to achieve this goal; by severely distorting market decisions and the allocation of resources, it impedes both potential economic growth and potential tax revenue. The nation’s persistently sluggish economic growth and dire long-term fiscal outlook have increased the urgency to reform the federal revenue system. But what does successful, sustainable tax reform look like? What are its key elements? And what would it achieve?
Veronique de Rugy, Jason J. Fichtner, Charles Blahous, Matthew Mitchell | Mar 15, 2013
Despite years without a federal budget, trillion-dollar deficits, and ad hoc, crisis-driven fiscal and economic policies that failed to deal with the looming entitlement crisis, leaders on both sides in Washington are now touting seemingly miraculous progress toward a “fix” to our budgetary woes.
Jason J. Fichtner, Veronique de Rugy | Jan 25, 2013
The debt ceiling, or the legal limit the federal government may borrow, is set currently at $16.4 trillion.[1] In his latest report, Secretary of the Treasury Timothy Geithner predicts that the United States will need to increase the debt ceiling sometime between February 15, 2013, and early March 2013.[2] The Congressional Research Service estimates the federal government will have to issue an additional $700 billion in debt above the current statutory limit to finance obligations for the remainder of FY2013…

Expert Commentary

Feb 05, 2016

With the results now in from the Affordable Care Act’s third open enrollment period, it’s getting increasingly difficult to sugarcoat the extremely low numbers of enrollees relative to original projections. The 12.7 million people who signed up for an exchange plan amounts to just half as many enrollees as was projected by government and private sector research organizations when the ACA passed.
Feb 04, 2016

The statutory limit on how much debt the federal government can accumulate is back in the news, but this time it's not because Washington is close to breaching it. That's not a present concern thanks to the year-end bipartisan spending spree that included a suspension of the debt limit until March 2017.
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Feb 02, 2016

Our best information remains that the ACA, by expanding Medicaid as well as other subsidized insurance, didn’t merely shift more of the burden of funding existing health care costs to taxpayers– it actually increased those costs.
Feb 02, 2016

Six years after enactment, the ACA remains a law very much in turmoil. Beyond the widely reported website problems, many of the law's fundamental institutions — individual exchanges, SHOP exchanges, co-ops, mandates — are failing to perform as expected.
Jan 26, 2016

Relative to its 2015 ACA projections, CBO now expects several million fewer enrollees, even including the fact that Medicaid enrollment is above previous projections. CBO also expects higher federal spending, largely because the ACA Medicaid expansion appears much more costly than CBO expected. The combination of lower enrollment and higher federal spending than expected provides additional evidence that the ACA’s benefits were not worth the corresponding costs.
Jan 20, 2016

It's been almost 30 years since the last major federal tax system overhaul, and the chances of real reform in the next year look grim. But as usual, there's some hope in the states, and reformers may want to direct their efforts there.

Charts

The latest federal budget projections from the Congressional Budget Office (CBO) should set off alarm bells on Capitol Hill. According to CBO’s baseline, federal debt held by the public will climb from $14 trillion this year to almost $24 trillion in fiscal year 2026. Measured as a share of the economy, publicly held debt as a percentage of GDP is projected to jump substantially, from 75.6 percent to 86.1 percent in the next 11 years. As the following chart shows, current debt levels are already disconcertingly high.

Experts

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University and a nationally syndicated columnist. Her primary research interests include the U.S. economy, the federal budget, homeland security, taxation, tax competition, and financial privacy. Her popular weekly charts, published by the Mercatus Center, address economic issues ranging from lessons on creating sustainable economic growth to the implications of government tax and fiscal policies. She has testified numerous times in front of Congress on the effects of fiscal stimulus, debt and deficits, and regulation on the economy.
Charles Blahous is the director of the Spending and Budget Initiative, a senior research fellow at the Mercatus Center at George Mason University and has served as a public trustee for Social Security and Medicare. He specializes in domestic economic policy and retirement security (with an emphasis on Social Security), as well as federal fiscal policy, entitlements, demographic change, and health-care reform.
Brian Blase is a Senior Research Fellow with the Spending and Budget Initiative at the Mercatus Center at George Mason University.
Antony Davies is associate professor of economics at Duquesne University, Mercatus Affiliated Senior Scholar, and Strata Research Fellow. Davies has authored over 150 op-eds for, among others, the Wall Street Journal, Los Angeles Times, Washington Post, Forbes, Investors Business Daily, and New York Daily News.
Jason J. Fichtner is a senior research fellow at the Mercatus Center at George Mason University. His research focuses on Social Security, federal tax policy, federal budget policy, retirement security, and policy proposals to increase saving and investment.

Podcasts

Veronique de Rugy | January 13, 2016
Veronique de Rugy discusses last night’s State of the Union and the economy on WVLK radio.

Recent Events

Join Mercatus senior health care scholar Brian Blase, senior regulatory fellow Patrick McLaughlin, & senior budget reform fellow, Jason J. Fichtner, for a Capitol Hill Campus that will showcase Mercatus resources & explore how congressional staff can more effectively use our research.

Books

Joseph Antos, Charles Blahous, James C. Capretta, Robert Graboyes, Jason J. Fichtner, June O’Neill , Nina Owcharenko , Thomas P. Miller, | Apr 08, 2014
Top experts explain everything you wanted to know about Medicaid—from federal-state financing to potential reforms.

Media Clippings

Jason J. Fichtner | Jul 28, 2014
This excerpt originally appeared in The Daily Caller.
Jason J. Fichtner | Jul 24, 2014
This excerpt originally appeared in FOX Business.
Jason J. Fichtner | Jul 17, 2014
This excerpt originally appeared in FOX Business.
Charles Blahous | Jun 04, 2014
This excerpt originally appeared in CQ and also appeared Roll Call.
Veronique de Rugy | May 20, 2014
This excerpt originally appeared in Wall Street Journal.
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