Congressional Budget Office

CBO: Minimum wage hike would cost 500,000 jobs

An ever-increasing federal minimum wage is a statist panacea. Even Mitt Romney supported tying it to inflation in the 2012 campaign. But the CBO on Tuesday released its report scoring the proposals, and the numbers aren’t good.

If the minimum wage were raised on $10.10, as the Obama administration has proposed, somewhere between 500,000 and 1 million jobs could be lost over the next two years:

Once fully implemented in the second half of 2016, the $10.10 option would reduce total employment by about 500,000 workers, or 0.3 percent, CBO projects. As with any such estimates, however, the actual losses could be smaller or larger; in CBO’s assessment, there is about a two-thirds chance that the effect would be in the range between a very slight reduction in employment and a reduction in employment of 1.0 million worker

Economists and politicians have debated for decades about the minimum wage’s effect on employment, but the non-partisan government calculator has spit out a decisively negative result, at least for employment.


Adding more salt to the wound, the CBO finds that raising the minimum wage also won’t be the immediate fix for poverty that many thing it would:

The increased earnings for low-wage workers

Report: Long-term budget issues present fiscal threat to U.S.

National Debt

TL;DR version: This is a pretty long post dealing with a subject that generally fascinates only those interested in fiscal policy. The short of what you need to know is that the CBO expects the economy to perform better in the short-term, with higher revenues and lower budget deficits. But the rising costs of entitlements and the cost of servicing the national debt will drive up spending substantially over the long-term with the public’s share of the national debt becoming equal to the size of the economy (or GDP). As if the baseline scenario isn’t concerning enough, the alternative fiscal scenario is even more of a disaster. All charts below come directly from the CBO’s report.

Forget Syria or the still ongoing war on terrorism. The real security threat is the national debt. That’s what Admiral Mike Mullen warned in 2010. Those words still ring true today, especially after reading the latest long-term budget projections released yesterday by the Congressional Budget Office (CBO).

The annual report presents the federal budget outlook for the next 10 years (2013-2023) as well as provides a look into long-term projections relative to both current law and alternative scenarios, the latter of which most economists believe present a more realistic view of the United States’ fiscal health.

CBO Director Doug Elmendorf told reporters yesterday that the “federal budget is on a course that cannot be sustained indefinitely.”

It’s Simple to Balance the Budget with Modest Spending Restraint


Written by Daniel J. Mitchell, a senior fellow at the Cato Institute. Posted with permission from Cato @ Liberty.

Now that new numbers have been released by the Congressional Budget Office, it’s time once again for me to show how easy it is to balance the budget with modest spending restraint (though please remember our goal should be smaller government, not fiscal balance).

CBO issues another “fiscal cliff” warning

Back in May, the Congressional Budget Office (CBO) issued a stark warning to Congress that tax hikes scheduled to happen at the beginning of the year could trigger another recession. Since that time President Barack Obama and Senate Democrats have refused to act on extension of all current tax rates, which is the position of House Republicans. Instead, they’ve only pushed for one-year extension for individuals making $200,000 and families bringing in $250,000.

But yesterday, the CBO once again stressed that the looming tax hikes could hurt the economy if the stalemate doesn’t end:

In a fresh warning about the so-called “fiscal cliff,” the nonpartisan CBO reiterated that the U.S. economy will go into a recession next year if the Bush-era tax cuts expire and automatic spending cuts take effect. Read the CBO report.

In its latest report, the CBO predicts that the U.S. economy will grow at a 2.1% clip in 2012, but fall by 0.5% between the fourth quarter of 2012 and the fourth quarter of 2013 under the fiscal cliff scenario.

Previously, the CBO said growth would be 0.5% in 2013 under the fiscal cliff. In its new report it said the “underlying strength” of the economy is weaker.
The CBO said unemployment would jump to around 9% in the second half of 2013 from its current 8.3% if the tax increases and spending cuts play out.

CBO report shows high-cost per stimulus job

President Barack Obama and Democrat have time and time again repeated the talking point that the $831 billion American Recovery and Reinvestment Act, passed in early 2009, helped save the economy, which was suffering the effects of a severe recession, and helped create jobs.

However, a new report from the Congressional Budget Office (CBO) via James Pethokoukis shows that the stimulus bill was largely wasteful considering its affects on unemployment, with a high cost for what jobs were created:

When [the American Recovery and Reinvestment Act] was being considered, the Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation estimated that it would increase budget deficits by $787 billion between fiscal years 2009 and 2019. CBO now estimates that the total impact over the 2009–2019 period will amount to about $831 billion.

By CBO’s estimate, close to half of that impact occurred in fiscal year 2010, and more than 90 percent of ARRA’s budgetary impact was realized by the end of March 2012. CBO has estimated the law’s impact on employment and economic output using evidence about the effects of previous similar policies and drawing on various mathematical models that represent the workings of the economy. …

On that basis CBO estimates that ARRA’s policies had the following effects in the first quarter of calendar year 2012 compared with what would have occurred otherwise:

– They raised real (inflation-adjusted) gross domestic product (GDP) by between 0.1 percent and 1.0 percent,

– They lowered the unemployment rate by between 0.1 percentage points and 0.8 percentage points,

CBO: Deficit to exceed $1 trillion in 2012

On the campaign trail and during the third presidential debate with Sen. John McCain (R-AZ) in 2008, then-candidate Barack Obama promised that Americans would see a “net-spending cut” during his presidency.

The claim was met with a boatload of skepticism given that Obama was proposing massive expansions in healthcare and non-defense discretionary spending; however, we all crossed our fingers that he would follow through, but we didn’t hold our breath.

The skepticism proved to be justified. Just a couple of months after coming into office, President Barack Obama told Americans that under his budget that there would be trillion dollar deficits as far as the eye can see.

He wasn’t kidding. The Congressional Budget Office released its budget report for this current fiscal year yesterday, predicting yet another trillion dollar budget deficit and unemployment hovering around 9%:

The Congressional Budget Office on Tuesday predicted the deficit will rise to $1.08 trillion in 2012.

The office also projected the jobless rate would rise to 8.9 percent by the end of 2012, and to 9.2 percent in 2013.

These are much dimmer forecasts than in CBO’s last report in August, when the office projected a $973 billion deficit. The report reflects weaker corporate tax revenue and the extension for two months of the payroll tax holiday.
If the CBO estimate is correct, it would mean that the United States recorded a deficit of more than $1 trillion for every year of Obama’s first term.

Mr. President, Think of the Children

In his press conference, President Barack Obama said that we must close the deficit by tackling everything—naturally, with as many contradictions as possible—including entitlements, though we must still “keep faith with seniors and children with disabilities.”

It sounds grand and noble, but the problem is that if Obama decides to “keep faith” with seniors, he’s going to have to do that by vigorously screwing over the next generation. As Professor Lawrence J. Kotlikoff of Boston University points out in a recent Bloomberg column, we’re broke. (Yes, I know that’s his schtick. But he’s absolutely right.)

How big is the fiscal gap? By my own calculations using the CBO data, it now stands at $211 trillion — a huge sum equaling 14 times the country’s economic output. To arrive at that figure, I assumed that annual noninterest spending, as well as taxes, would grow indefinitely by 2 percent a year beyond 2075, the point at which the CBO’s estimates end.

Most of that comes from entitlement spending, which was where Cato policy analyst Michael Tanner came up with the $119.5 trillion in the hole figure just a few months ago. Obviously, it’s getting worse all the time.

CBO long-term budget outlook shows nothing new

The Congressional Budget Office (CBO) released the 2011 Long-Term Budget Outlook yesterday. As you might expect, both sides are talking up the aspects of the report that play to their talking points. For example, if you listen to our progressive/liberal friends, they’re quick to point to charts in the report showing that budget deficits wouldn’t be as large if the 2001/2003 tax cuts hadn’t been extended. Of course, most, if any at all, don’t acknowledge that the CBO also says this in the report:

Changes in marginal tax rates (the rates that apply to an additional dollar of a taxpayer’s income) also affect output. For example, a lower marginal tax rate on capital income (income derived from wealth, such as stock dividends, realized capital gains, or the owner’s profits from a business) increases the after-tax rate of return on saving, strengthening the incentive to save; more saving implies more investment, a larger capital stock, and greater output. However, if that lower marginal tax rate increases people’s after-tax returns on savings, they do not need to save as much to have the same future standard of living, which reduces the supply of saving. CBO concludes, as do most analysts, that the former effect outweighs the latter, such that a lower marginal tax rate on capital income increases saving. A higher marginal tax rate on capital income has the opposite effect.

Don’t Trust Those CBO Numbers

The Washington Post, of all places, explains today why the CBO numbers released yesterday should not be trusted:

The latest estimate of what health-care reform would mean for the government’s finances was such a hot document Thursday that at times the Congressional Budget Office’s Web site couldn’t handle the traffic.

But as much as the 25-page “score” of the legislation was treated as holy writ in Washington — Democrats eagerly flagged its conclusion that the package they aim to pass this weekend would cut the deficit by $138 billion over the coming decade — the reality is considerably messier.

Budget experts generally have high praise for the work of CBO analysts, the non-ideological technocrats who crunch the numbers to estimate the fiscal impact of legislation. But their work is often more art than science, and although the forecasts that accompany legislation are always filled with uncertainty, this one contains more than most.

One major reason is the sheer complexity of the legislation. If Congress were considering, say, a 20-cent increase in the gasoline tax, the CBO could easily analyze how that would affect gas consumption and do some simple math to calculate how much money it would raise. The same goes for figuring out the cost of legislation that offers a new benefit, such as an expansion of food stamps.

What? The new Republican majority wants to keep the Democrat-appointed CBO Director

CBO Director Douglas Elmendorf

Since I’ve accused the Congressional Budget Office of “witch doctor economics and gypsy forecasting,” it’s obvious I’m not a big fan of the organization’s approach to fiscal analysis.

I’ve even argued that Republicans shouldn’t cite CBO when the bureaucrats reach correct conclusions on policy (at least when such findings are based on bad Keynesian methodology).

So nobody should be surprised that I think the incoming Republican majority should install new leadership at CBO (and the Joint Committee on Taxation as well).

So why, then, are some advocates of smaller government – such as Greg Mankiw,Keith HennesseyAlan Viard, and Michael Strain – arguing that Republicans should keep the current Director, Doug Elmendorf, who was appointed by the Democrats back in 2009?

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