Spending & Budget

Research

The Hidden Costs of Tax Compliance Jason J. Fichtner, Jacob Feldman \| May 20, 2013 The tax code, far beyond simply collecting revenue to fund the operations of the federal government, attempts to perform policy and political functions as well. This paper does not examine the normative value of these provisions, but instead examines the hidden costs of today’s tax code: time and money spent submitting tax forms, foregone economic growth, lobbying expenditures, and gaps in revenue collection. These problems grow larger as the Internal Revenue Code becomes more complicated and temporary.[1] Based on the studies reviewed in this paper, we estimate that hidden costs range from $215 billion to $987 billion and that the tax code results in a $452 billion revenue gap in unreported taxes. The economic costs are substantial relative to the $2.45 trillion in revenues raised by the federal government in 2012.	Defense Spending and the Economy Robert J. Barro , Veronique de Rugy \| May 07, 2013 While the impact of across-the-board federal defense-spending cuts on national security may be up for debate, claims of these cuts’ dire impact on the economy and jobs are grossly overblown.
The Case for Across-the-Board Spending Cuts Jeff Bergner \| Mar 26, 2013 Across-the-board cuts are often referred to as using a “meat ax,” as opposed to more carefully targeted cuts, which are compared to using a “scalpel.” Interest group pressure will weigh in against targeted cuts, however, and especially in our current divided government, across-the-board cuts are the only realistic way to cut spending.	Welfare Block Grants as a Guide for Medicaid Reform Daniel Sutter \| Mar 21, 2013 Driven by the need to reform unsustainable entitlement programs, policymakers today are looking to the successful example of welfare reform—specifically, to its block grants to states. To inform this discussion, a new Mercatus Center at George Mason University study by Daniel Sutter reviews arguments in the debate over block grants versus matching grants for joint federal-state programs, examines the effects of shifting control of welfare programs to the states, and considers how the lessons from welfare reform can inform the current debate about Medicaid block grants.
Austerity: The Relative Effects of Tax Increases versus Spending Cuts Veronique de Rugy, Alberto Alesina \| Mar 07, 2013 There is still significant debate about the short-term economic impact of fiscal adjustments. However, as we will show in this paper, important lessons have emerged.	The Affordable Care Act's Optional Medicaid Expansion: Considerations Facing State Governments Charles Blahous \| Mar 05, 2013 In the wake of a 2012 Supreme Court ruling, states face complex decisions concerning whether to expand Medicaid coverage to the full extent envisioned in the Affordable Care Act (ACA, commonly referred to as Obamacare). With the federal government no longer able to coerce expansion, states must base their decisions on value judgments that incorporate each state’s unique budgetary circumstances, the needs of its uninsured population, and the incentives established by interactions among the ACA’s provisions.

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Testimony & Comments

Long-Term Unemployment Keith Hall \| Apr 24, 2013 Two significant problems have become evident through this lengthy period of slow job growth. First, there has been an unprecedented disengagement from the labor force with current participation at its lowest level in almost 35 years. This means there are currently 102 million jobless people in the United States, but less than 12 million are still actively looking for work and therefore counted as unemployed. Second, the number of long-term unemployed is at a record high. They currently represent over 4.6 million people, and the long-term unemployment rate (the share of the labor force unemployed for over six months) remains well above historical levels at 3.0 percent.	A Guarantee for Failure: Government Lending Under Sec. 1705 Veronique de Rugy \| Jul 18, 2012 The Department of Energy’s loan guarantee programs have been the focus of much public attention since energy companies Solyndra, Beacon Power, and Abound went bankrupt, leaving taxpayers to shoulder hundreds of mil- lions of dollars in loan guarantees. The evidence strongly suggests that these programs fall short of their stated goals of developing clean energy and creating jobs.
The Challenges of Producing Economic Data for the 21st Century Keith Hall \| Jun 19, 2012 In his testimony, Keith Hall discusses the economic statistics produced by the federal statistical system. He comments on some of the challenges that the current system is struggling to meet and a handful of specific inadequacies in data coverage.	Assessing the Department of Energy Loan Guarantee Program Veronique de Rugy \| Jun 19, 2012 For obvious reasons, more than any other recent events, the waste of taxpayers’ money due to Solyndra’s failure has attracted much attention. However, the problems with loan guarantees are much more fundamental than the cost of one or more failed projects.
Addressing Concerns About the Integrity of the U.S. Department of Labor's Jobs Reporting Keith Hall \| Jun 06, 2012 For BLS to effectively disseminate data directly to the public and maintain credibility as an independent, objective provider of data, DOL should not interfere with BLS’ dissemination of economic data through any means.	What Can Government Do To Create Jobs? Matthew Mitchell \| Feb 01, 2012 Matthew Mitchell testified before the House Committee on Education and the Workforce on what the government can do to create more jobs.

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Research Summaries & Toolkits

The FY 2014 Budget Proposals 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.	The Debt Ceiling: Assets Available to Prevent Default 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…
Mercatus Center Policy Guide \| Aug 03, 2012 The Mercatus Center at George Mason University is pleased to provide you with our new policy guide. The guide is designed to provide easily accessible economic information that might prove useful in pre- paring for hearings or town hall meetings, drafting speeches or policy papers, and generally educating the public regarding spending, taxes, regulation, financial markets, and technology policy.	Assessing the President's FY2013 Budget Proposal \| Feb 13, 2012 This policy brief takes a look at the president's FY2013 budget proposal and emphasizes the need for fundamental reform in the areas of spending, taxes, and the budget process.
"Fixing" the Tax Code: Key Principles for Successful Reform \| Feb 01, 2012 The most basic goal of tax policy is to raise enough revenue to meet the government’s spending requirements with the least impact on market behavior. The United States’ tax code has long failed to meet this aim: by severely distorting market decisions and the allocation of resources, it impedes both potential economic growth and potential tax revenue.	Fixing the Corporate Income Tax \| Nov 2011 A new working paper, “Why the United States Needs to Restructure the Corporate Income Tax,” by Mercatus Center at George Mason University senior scholar Jason Fichtner suggests successful reform of the U.S. corporate tax code must address its fundamental problems: 1) the uncompetitive corporate income tax rate; and 2) the outdated “worldwide” system for corporate tax collection.

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Expert Commentary

Hard To Find the Return on Green Energy Investments Washington Examiner By Veronique de Rugy \| May 20, 2013 Wind energy is the darling of the green energy sector. Over the past 35 years, the industry has received nearly $30 billion in federal subsidies and cash grants, and Washington has promised another $12 billion in subsidies over the next decade.	For Whom the Taxpayer Toils Philadelphia Inquirer By Antony Davies, James R. Harrigan \| Apr 17, 2013 Each July Fourth, Americans celebrate their freedom, the result of a revolution over "taxation without representation." This month, we celebrate another type of freedom - from our own tax man. It turns out that taxation with representation is no picnic either.
Film Tax Credits Don't Give States An Economic Boost U.S. News and World Report By Eileen Norcross \| Apr 16, 2013 From Massachusetts to North Carolina, Michigan and Iowa, a similar picture is emerging: Film tax credits don't deliver to state economies what they cost to treasuries and taxpayers.	NCAA Tax Subsidies Are the Real 'March Madness' U.S. News and World Report By Matthew Mitchell, Christopher Koopman \| Apr 08, 2013 Not everyone was able to attend this year's NCAA Men's basketball tournament in person, but a lot of taxpayers have helped pay for tickets to the games and might not even realize it.
Goodbye To Green Jobs, You Won't Be Missed Forbes By Keith Hall \| Apr 04, 2013 As the commissioner of the BLS when it created the GGS program, I’m okay with the decision to terminate the program, even with an insider’s perspective on the latest report—which estimates that there are now 3.4 million jobs associated with the production of green goods and services.	Let Cyprus Be the Lesson Pittsburgh Tribune-Review By Antony Davies, James R. Harrigan \| Mar 22, 2013 How can the United States avoid the fate that awaits this growing list of countries? The answer to this question is as easy factually as it is difficult politically: The United States must balance its budget.

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Charts

Renewable-Energy Subsidies and Electricity Generation

This chart uses data from the US Energy Information Administration to compare federal investments in green energy and the share of green energy in electricity generation.

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Experts

Veronique de Rugy

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University. Her primary research interests include the federal budget, homeland security, taxation, tax competition, and financial privacy issues.

Charles Blahous

Charles Blahous is a senior research fellow at the Mercatus Center and public trustee for Medicare and Social Security. His primary research interests include retirement security, with an emphasis on Social Security and employer-provided defined benefit pensions, as well as federal fiscal policy, entitlements, demographic change, economic stimulus, financial market regulation, and health care reform.

Tyler Cowen

Tyler Cowen is the general director at the Mercatus Center and the Holbert C. Harris Professor of Economics at George Mason University.

Antony Davies

Antony Davies is associate professor of economics at Duquesne University and Mercatus Affiliated Senior Scholar at George Mason University. His primary research interests include econometrics, public policy, and economic psychology.

Jason J. Fichtner

Jason J. Fichtner is a senior research fellow at the Mercatus Center. His primary research interests include Social Security, federal tax policy, federal budget policy, retirement security, and policy proposals to increase saving and investment.

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Videos

Keith Hall Discusses Employment after Graduation on Fox 5

Keith Hall | May 15, 2013

Optional Medicaid Expansion: Considerations Facing the States

Charles Blahous | May 14, 2013

Podcasts

Veronique De Rugy Discusses her Research on the Defense Multiplier on WRVA

Veronique de Rugy | May 21, 2013

Veronique De Rugy Discusses her Research on the Defense Multiplier on WRVA

Download the MP3

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Recent Events

The FY 2014 ‘Budget’: The Proposals and Where We Go from Here

Please join the Mercatus Center at George Mason University’s Capitol Hill Campus for a discussion on the president’s and Congress’s fiscal year 2014 budget proposals—and whether any of the proposals adequately address the nation’s long-term budget challenges.

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Books

Freedom in the 50 States, 2013 Edition

William Ruger, Jason Sorens | Mar 28, 2013

Now in its third edition, Freedom in the 50 States presents a completely revised and updated ranking of the American states based on how their policies promote freedom in the fiscal, regulatory, and personal realms.

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More Media Clippings

The Hidden Costs of Tax Compliance Jason J. Fichtner, Jacob Feldman \| May 20, 2013 The tax code, far beyond simply collecting revenue to fund the operations of the federal government, attempts to perform policy and political functions as well. This paper does not examine the normative value of these provisions, but instead examines the hidden costs of today’s tax code: time and money spent submitting tax forms, foregone economic growth, lobbying expenditures, and gaps in revenue collection. These problems grow larger as the Internal Revenue Code becomes more complicated and temporary.[1] Based on the studies reviewed in this paper, we estimate that hidden costs range from $215 billion to $987 billion and that the tax code results in a $452 billion revenue gap in unreported taxes. The economic costs are substantial relative to the $2.45 trillion in revenues raised by the federal government in 2012.	Defense Spending and the Economy Robert J. Barro , Veronique de Rugy \| May 07, 2013 While the impact of across-the-board federal defense-spending cuts on national security may be up for debate, claims of these cuts’ dire impact on the economy and jobs are grossly overblown.
The Case for Across-the-Board Spending Cuts Jeff Bergner \| Mar 26, 2013 Across-the-board cuts are often referred to as using a “meat ax,” as opposed to more carefully targeted cuts, which are compared to using a “scalpel.” Interest group pressure will weigh in against targeted cuts, however, and especially in our current divided government, across-the-board cuts are the only realistic way to cut spending.	Welfare Block Grants as a Guide for Medicaid Reform Daniel Sutter \| Mar 21, 2013 Driven by the need to reform unsustainable entitlement programs, policymakers today are looking to the successful example of welfare reform—specifically, to its block grants to states. To inform this discussion, a new Mercatus Center at George Mason University study by Daniel Sutter reviews arguments in the debate over block grants versus matching grants for joint federal-state programs, examines the effects of shifting control of welfare programs to the states, and considers how the lessons from welfare reform can inform the current debate about Medicaid block grants.
Austerity: The Relative Effects of Tax Increases versus Spending Cuts Veronique de Rugy, Alberto Alesina \| Mar 07, 2013 There is still significant debate about the short-term economic impact of fiscal adjustments. However, as we will show in this paper, important lessons have emerged.	The Affordable Care Act's Optional Medicaid Expansion: Considerations Facing State Governments Charles Blahous \| Mar 05, 2013 In the wake of a 2012 Supreme Court ruling, states face complex decisions concerning whether to expand Medicaid coverage to the full extent envisioned in the Affordable Care Act (ACA, commonly referred to as Obamacare). With the federal government no longer able to coerce expansion, states must base their decisions on value judgments that incorporate each state’s unique budgetary circumstances, the needs of its uninsured population, and the incentives established by interactions among the ACA’s provisions.

Long-Term Unemployment Keith Hall \| Apr 24, 2013 Two significant problems have become evident through this lengthy period of slow job growth. First, there has been an unprecedented disengagement from the labor force with current participation at its lowest level in almost 35 years. This means there are currently 102 million jobless people in the United States, but less than 12 million are still actively looking for work and therefore counted as unemployed. Second, the number of long-term unemployed is at a record high. They currently represent over 4.6 million people, and the long-term unemployment rate (the share of the labor force unemployed for over six months) remains well above historical levels at 3.0 percent.	A Guarantee for Failure: Government Lending Under Sec. 1705 Veronique de Rugy \| Jul 18, 2012 The Department of Energy’s loan guarantee programs have been the focus of much public attention since energy companies Solyndra, Beacon Power, and Abound went bankrupt, leaving taxpayers to shoulder hundreds of mil- lions of dollars in loan guarantees. The evidence strongly suggests that these programs fall short of their stated goals of developing clean energy and creating jobs.
The Challenges of Producing Economic Data for the 21st Century Keith Hall \| Jun 19, 2012 In his testimony, Keith Hall discusses the economic statistics produced by the federal statistical system. He comments on some of the challenges that the current system is struggling to meet and a handful of specific inadequacies in data coverage.	Assessing the Department of Energy Loan Guarantee Program Veronique de Rugy \| Jun 19, 2012 For obvious reasons, more than any other recent events, the waste of taxpayers’ money due to Solyndra’s failure has attracted much attention. However, the problems with loan guarantees are much more fundamental than the cost of one or more failed projects.
Addressing Concerns About the Integrity of the U.S. Department of Labor's Jobs Reporting Keith Hall \| Jun 06, 2012 For BLS to effectively disseminate data directly to the public and maintain credibility as an independent, objective provider of data, DOL should not interfere with BLS’ dissemination of economic data through any means.	What Can Government Do To Create Jobs? Matthew Mitchell \| Feb 01, 2012 Matthew Mitchell testified before the House Committee on Education and the Workforce on what the government can do to create more jobs.

The FY 2014 Budget Proposals 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.	The Debt Ceiling: Assets Available to Prevent Default 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…
Mercatus Center Policy Guide \| Aug 03, 2012 The Mercatus Center at George Mason University is pleased to provide you with our new policy guide. The guide is designed to provide easily accessible economic information that might prove useful in pre- paring for hearings or town hall meetings, drafting speeches or policy papers, and generally educating the public regarding spending, taxes, regulation, financial markets, and technology policy.	Assessing the President's FY2013 Budget Proposal \| Feb 13, 2012 This policy brief takes a look at the president's FY2013 budget proposal and emphasizes the need for fundamental reform in the areas of spending, taxes, and the budget process.
"Fixing" the Tax Code: Key Principles for Successful Reform \| Feb 01, 2012 The most basic goal of tax policy is to raise enough revenue to meet the government’s spending requirements with the least impact on market behavior. The United States’ tax code has long failed to meet this aim: by severely distorting market decisions and the allocation of resources, it impedes both potential economic growth and potential tax revenue.	Fixing the Corporate Income Tax \| Nov 2011 A new working paper, “Why the United States Needs to Restructure the Corporate Income Tax,” by Mercatus Center at George Mason University senior scholar Jason Fichtner suggests successful reform of the U.S. corporate tax code must address its fundamental problems: 1) the uncompetitive corporate income tax rate; and 2) the outdated “worldwide” system for corporate tax collection.

Hard To Find the Return on Green Energy Investments Washington Examiner By Veronique de Rugy \| May 20, 2013 Wind energy is the darling of the green energy sector. Over the past 35 years, the industry has received nearly $30 billion in federal subsidies and cash grants, and Washington has promised another $12 billion in subsidies over the next decade.	For Whom the Taxpayer Toils Philadelphia Inquirer By Antony Davies, James R. Harrigan \| Apr 17, 2013 Each July Fourth, Americans celebrate their freedom, the result of a revolution over "taxation without representation." This month, we celebrate another type of freedom - from our own tax man. It turns out that taxation with representation is no picnic either.
Film Tax Credits Don't Give States An Economic Boost U.S. News and World Report By Eileen Norcross \| Apr 16, 2013 From Massachusetts to North Carolina, Michigan and Iowa, a similar picture is emerging: Film tax credits don't deliver to state economies what they cost to treasuries and taxpayers.	NCAA Tax Subsidies Are the Real 'March Madness' U.S. News and World Report By Matthew Mitchell, Christopher Koopman \| Apr 08, 2013 Not everyone was able to attend this year's NCAA Men's basketball tournament in person, but a lot of taxpayers have helped pay for tickets to the games and might not even realize it.
Goodbye To Green Jobs, You Won't Be Missed Forbes By Keith Hall \| Apr 04, 2013 As the commissioner of the BLS when it created the GGS program, I’m okay with the decision to terminate the program, even with an insider’s perspective on the latest report—which estimates that there are now 3.4 million jobs associated with the production of green goods and services.	Let Cyprus Be the Lesson Pittsburgh Tribune-Review By Antony Davies, James R. Harrigan \| Mar 22, 2013 How can the United States avoid the fate that awaits this growing list of countries? The answer to this question is as easy factually as it is difficult politically: The United States must balance its budget.