Spending and Budget Initiative

Spending and Budget Initiative

The Spending and Budget Initiative draws on a team of university economists and policy practitioners with diverse expertise in government spending and budget reform, assembled to provide policy makers an honest understanding of budgets, spending, deficits, and debt and how these issues relate to economic growth and progress. Mercatus scholars work alongside policy makers to identify fiscally responsible policies and actionable options for budget reform.

Research

Bradley Herring, Erin Trish | Feb 2016
At least 70 percent of the recent slowdown in healthcare spending can likely be explained by long-standing patterns in healthcare spending related to changes in income, insurance, and provider market characteristics.
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.

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 | 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.
Neil Meredith | Dec 22, 2014
This comment considers the potential impact of the Office of Personnel Management’s (OPM) proposed rule change to the Multi-State Plan Program (MSP) for the affordable insurance exchanges created through the Patient Protection and Affordable Care Act of 2010. The purpose of the proposed rule is to further explain OPM’s direction in meeting the statutory requirements of the MSP program concerning health issuers that establish an MSP option with OPM.
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

Charts

Veronique de Rugy | Feb 09, 2016
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

Videos

Veronique de Rugy | February 02, 2016
In the hearing titled “Unsustainable Federal Spending and the Debt Limit" before the Financial Services Committee, Veronique de Rugy testified on fundamental spending reform.

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

| March 14, 2013
Please join us for a casual reception where you can take a break from March Madness and meet some of our scholars who can provide the kind of practical information you need to be most effective in your work.

Books

| Sep 29, 2015
In a new set of essays commissioned by the Mercatus Center at George Mason University, seven leading policy experts share innovative ideas on how to solve the pre-existing condition challenge. While their approaches exhibit differences as well as similarities, they are unified in their pursuit of a humane, equitable, fiscally sustainable solution to a conundrum that has driven and strained the entire post–World War II healthcare debate.
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