Content Tagged: federal

Are Tax Breaks a Good Thing?

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April 2, 2012

Which costs the federal government more: a $2,100 check from Uncle Sam or a tax break worth $2,100?

Jeanne Sahadi for CNN Money begins her article about the national government’s “hidden” spending by asking this question. In reality, $2,100 is the same cost for both, but the tax break does not count towards the federal budget. Fiscal experts are troubled by these tax breaks because they could end up causing the government to lose billions of dollars. The government, however, uses these breaks as ways to get certain goals accomplished without spending “physical” money. Sahadi provides two examples:

Congress wants to foster homeownership, so it lets homeowners deduct their mortgage interest. Lawmakers want to reduce greenhouse gas emissions, so they offer a tax credit to companies that produce biofuels such as ethanol or biodiesel.


If these tax breaks were considered government spending, a major topic of discussion for politicians and presidential candidates, then the government’s spending as GDP would be much higher. According to Sahadi, other unreported expenditures and fees help the government maintain a lower percentage of GDP spending. The article states that, “In all, if they were also recategorized in the budget, government spending in 2007 would have to be reported as 25.4% of GDP — or a nearly a third more than advertised.”

Reevaluating the tax code would allow policymakers to see how much the government actually spends. Donald Marron, director of the Tax Policy Center, asserts that limiting tax cuts would increase the revenue of the federal government, hopefully bringing in billions of dollars. Nonetheless, a debate on the tax breaks must occur because many passed breaks go unevaluated after their acceptance. Marron states, “hidden spending should get the same scrutiny — and inspire the same enthusiasm for cuts — as the spending on entitlements, domestic programs, and defense that is targeted by today’s fiscal hawks.”

Teachers can use this article to discuss tax breaks and the many different types that exist. Possible areas to investigate: environment, industry, real estate, nongovernmental organizations (NGOs), etc. A possible activity is to research the presidential candidates tax plans and see the different areas in which they propose tax breaks. Students could discuss whether or not these breaks would be popular if citizens had to pay for them outright.


Ben Bernanke Talks Deficit Reduction

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February 8, 2012

Ben Bernanke, the Federal Reserve Chairman, expressed concern to legislators over the spending cuts and tax increases scheduled for 2013, reports Suzy Khimm for the Washington Post.  In his testimony on Tuesday, Bernanke discussed the current economic climate and gave his projections for the coming year.  He noted that, while the country’s economy has recovered more slowly than everyone had hoped, he remained optimistic for the coming year.

Forecasts given for 2012’s unemployment rate predicted a number far higher than what has proven to be true thus far.  According to the most recent jobs report, the United States added 243,000 jobs in January.  These additions brought down the unemployment rate to 8.3%.  Bernanke attributed this decrease, at least in part, to the recent revival of manufacturing in this country: “US manufacturers have become increasingly competitive on a global stage.”

Despite his lauding American manufacturers, Bernanke’s overall message was grim: he believed that the 2013 drastic fiscal changes (the expiration of the Bush tax cuts and the spending reductions triggered by the Budget Control Act) would slow economic recovery further.  Senator Pete Sessions (R-Ala.), questioned Bernanke and his claim that it was less important to reduce the deficit than to continue to encourage recovery and growth.  Bernanke’s response was simple: “What we want to do is have a credible, strong plan so that the economy doesn’t hit a huge pothole.”  Bernanke thus encouraged a deficit reduction plan that could phase in over a longer period of time than the automatic one set for January 2013.

In the Classroom

This article may be used in a variety of ways.  It may be introduced simply as a way to keep students apprised of the opinions being heard by Congress about the budget deficit.  It may also be used to introduce Ben Bernanke and the Federal Reserve, if you have not done so previously.

The article also may be used in a debate on the merits of the current plan for deficit reduction.  Bernanke provides an argument against the plan – he says that it occurs in too short a time and will slow overall economic recovery. What do your students think? Which topic is more important: economic recovery or deficit reduction? Is it possible to have one without the other?


The State of our Economic Union

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January 25, 2012

On Tuesday night, President Obama addressed Congress in the annual State of the Union speech.  The transcript of his speech may be found here. In just under an hour, Obama called attention to his accomplishments, described his plans for the future, asked Congress to try to overcome partisan difference to get things done, and invoked the American Dream as the ideal to which our country is striving.

During the speech, Obama only mentioned the federal deficit twice.  The first mention was buried within the first ten minutes.  He declared: “American manufacturers are hiring again, creating jobs for the first time since the late 1990s.  Together, we’ve agreed to cut the deficit by more than $2 trillion.  And we’ve put in place new rules to hold Wall Street accountable, so a crisis like this never happens again.”  In this mention, the agreement to cut the deficit seems to be just another of his many accomplishments.  It merely is part of a list, sandwiched between job creation and new regulations for Wall Street.

The second mention is much more informative and complete. He explains:

“When it comes to the deficit, we’ve already agreed to more than $2 trillion in cuts and savings.  But we need to do more, and that means making choices.  Right now, we’re poised to spend nearly $1 trillion more on what was supposed to be a temporary tax break for the wealthiest 2 percent of Americans.  Right now, because of loopholes and shelters in the tax code, a quarter of all millionaires pay lower tax rates than millions of middle-class households…As I told the Speaker this summer, I’m prepared to make more reforms that reign in long-term costs of Medicare and Medicaid, and strengthen Social Security, so long as those programs remain a guarantee of security for seniors.  But in return, we need to change our tax code so that people like me, and an awful lot of members of Congress, pay our fair share of taxes.”

According to Obama, the key to lowering the deficit is twofold: the government needs to act more frugally and reform policies that are expensive, and it needs change the tax code so that wealthier citizens pay more.

If your students were not required to watch the State of the Union, you could assign students to read parts of the speech or articles describing the speech.  Due to the fact that the State of the Union may be found on so many different media, you may assign students to pick one medium to watch/read/listen to the speech.

You may begin a discussion on Obama’s speech by asking: how did Obama first bring up the government debt? Why does he mention it within the context in which he does?  When else does Obama address the federal deficit, and what does he propose to address the deficit?  Why did Obama only dedicate two sentences to addressing an agreement made by Congress that took months to decide?  What do you, as students, think about his proposals? What are alternatives to what he proposed?

Because Congress currently has a Republican majority, many critics claim that Obama will not be able to get any of his proposals done during his last year of this term.  Others say that this State of the Union was the Obama’s response to the Republican primary candidates’ criticism.  What do your students think about these two criticisms?


The Economist Addresses the Budget Deficit

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February 13, 2010

A recent article in The Economist argues, “Neither the president nor Congress shows any sign of knowing how to tackle the deficit.”  Citing unemployment statistics and data concerning the deficit as a percentage of GDP, the article makes dire predictions about Washington’s willingness and ability to address this issue.

A classroom examination of this article should explore the consequences of constitutionally mandated state budgets.  From the article:  “Most states are legally barred from running deficits, so when their revenues fall in times of recession they make painful cuts, firing workers and ending programmes—thus exacerbating the downturn rather than offsetting it.”  Students should discuss the implications of this statement.  In what ways can balanced budgets do more harm than good?  What are the positive aspects of requiring balanced budgets?  What might this look like on a national scale?

Another avenue of exploration would be to begin talking about the topics politicians seem fearful to touch.  The article claims, “No one dares touch defense, in a troubled world. The Social Security pension scheme is deemed sacrosanct by nervy politicians.”  Is this true?  If so, why?  What changes might the government have to make to change these attitudes?  This discussion could lead into a lesson about why fiscal policy is often difficult to create.


Senate Appropriations Committee

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The Senate Appropriations Committee provides information about spending bills (past and present) as well as committee member biographies and a calendar of upcoming events.


QuickQuest on Federal Budget

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The QuickQuest on Federal Budget is a short that WebQuest will lead students to think about the problem of having a national debt, to play the interactive online application Budget Explorer and to write a persuasive essay.