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Standard Deductions: U.S. Corporate Tax Policy

April 18, 2014 Comments off

Standard Deductions: U.S. Corporate Tax Policy
Source: Council on Foreign Relations

The U.S. system for taxing corporate profits is outdated, ineffective at raising revenue, and creates perverse incentives for companies to shelter profits overseas. It is also, for most U.S. companies most of the time, a pretty good deal, which is one of the big reasons why any serious overhaul will be so difficult to achieve.

This is the fourth progress report and scorecard from CFR’s Renewing America initiative. Previous progress reports and scorecards have evaluated transportation infrastructure, federal education policy, and trade.

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Worksharing and Long-Term Unemployment

April 17, 2014 Comments off

Worksharing and Long-Term Unemployment (PDF)
Source: Center on Budget and Policy Priorities

The Great Recession was especially deep and especially long. The sustained departure of output from its trend path was accompanied by a large drop in employment, which stayed low relative to trend for an extended period as well. As this occurred, the percentage of workers who were long-term unemployed increased sharply. Even as the U.S. economy recovers, the painful legacy of the Great Recession lives on as these long-term unemployed workers continue to struggle to reconnect to society.

In light of this, policymakers and economists must ask whether smart policy could have mitigated large employment losses and the high incidence of long-term unemployment. We believe the answer is yes, and that worksharing is such a policy. Under worksharing, a firm can reduce the hours of its workforce in lieu of a layoff, and workers whose hours have been reduced are eligible for a prorated unemployment insurance (UI) benefit. In this way, a firm can weather a temporary lull in demand by reducing its payroll costs without laying off large number of workers.

In this paper we make three points. First, the impact of long-term unemployment on the lives of those affected is so significantly negative that addressing the issue should be a top priority for policymakers. Second, extended unemployment insurance benefits are an insufficient way to deal with unemployment, and additional policies are needed. Finally, an alternative reform of unemployment insurance could reduce the risk that the next recession might lead to another surge in long-term unemployment, help keep some of the millions of workers who are laid off every year in their jobs, and in so doing help avoid the problem of “hysteresis” associated with long-term unemployment.

DoD OIG — Section 847 Ethics Requirements for Senior Defense Officials Seeking Employment with Defense Contractors

April 17, 2014 Comments off

Section 847 Ethics Requirements for Senior Defense Officials Seeking Employment with Defense Contractors
Source: U.S. Department of Defense, Office of Inspector General

Objective
Our objectives were to (1) address the central database and DoD IG oversight provisions of Public Law 110-181, “The National Defense Authorization Act for Fiscal Year 2008,” Section 847, “Requirements for Senior Department of Defense Officials Seeking Employment with Defense Contractors,” January 28, 2008; (hereinafter referred to as “section 847”) (2) address subsequent direction from the House Armed Services Committee (HASC); and (3) accordingly determine:

  • Whether written legal opinions required by section 847 were “being provided and retained in accordance with the requirements of this section.” (Public Law 110-181, section 847 [b][2]).
  • “The Department of Defense’s record of compliance with section 847 of Public Law 110-181.” (HASC Report on the National Defense Authorization Act For Fiscal Year 2013).
  • Quantitative data specified by the HASC, as follows:
    • “the total number of opinions issued,
    • the total number of opinions retained in accordance with section 847,
    • any instances in which a request for a written opinion pursuant to section 847 lacked a corresponding written opinion, or
    • in which the written opinion was not provided to the requesting official or former official of the Department of Defense by the appropriate ethics counselor within 30 days after the request for a written opinion.”

DoD did not retain all required section 847 records in its designated central repository, the After Government Employment Advice Repository (AGEAR).

This occurred because the Department did not:

  • implement the 2010 DoD Inspector General (IG) report recommendation to transfer historical records into AGEAR when the database became operational,
  • centrally supervise section 847 activities by its decentralized Components, and
  • comply with Deputy Secretary guidance making AGEAR use mandatory as of January 1, 2012.

As a result:

  • The AGEAR database was incomplete with limited or no use by specific DoD organizations with significant contracting activity.
  • Individual section 847 records were located in multiple or decentralized locations, and in a number of cases were inaccurate, incomplete, and not readily accessible for examination.

New From the GAO

April 17, 2014 Comments off

New GAO Report
Source: Government Accountability Office

Information Security: SEC Needs to Improve Controls over Financial Systems and Data. GAO-14-419, April 17.
http://www.gao.gov/products/GAO-14-419
Highlights - http://www.gao.gov/assets/670/662614.pdf

CRS — The Distribution of Household Income and the Middle Class

April 17, 2014 Comments off

The Distribution of Household Income and the Middle Class (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

Although not itself a subject of legislation, the shape of the income distribution enters Congress’s decision-making process concerning such policy issues as taxes, means-tested benefits, and social insurance programs. Congress also considers legislation specifically in the name of those in the middle class, which is variously defined as some income level or income range within the distribution of U.S. households with income. After briefly analyzing the distribution of household money income in 2012, the report attempts to put the term “middle class” into greater perspective.

CRS — Community Development Financial Institutions (CDFI) Fund: Programs and Policy Issues

April 17, 2014 Comments off

Community Development Financial Institutions (CDFI) Fund: Programs and Policy Issues (PDF)
Source: Congressional Research Service (via National Agricultural Law Center)

As communities face a variety of economic challenges, some are looking to local banks and financial institutions for solutions that address the specific development needs of low-income and distressed communities. Community development financial institutions (CDFIs) provide financial products and services, such as mortgage financing for homebuyers and not-for-profit developers, underwriting and risk capital for community facilities; technical assistance; and commercial loans and investments to small, start-up, or expanding businesses. CDFIs include regulated institutions, such as community development banks and credit unions, and nonregulated institutions, such as loan and venture capital funds.

The Community Development Financial Institutions Fund (the Fund), an agency within the Department of the Treasury, administers several programs that encourage the role of CDFIs, and similar organizations, in community development. Nearly 1,000 financial institutions located throughout all 50 states and the District of Columbia are eligible for the Fund’s programs to provide financial and technical assistance to meet the needs of businesses, homebuyers, community developers, and investors in distressed communities. In addition, the Fund allocates the New Markets Tax Credit to more than 5,000 eligible investment vehicles in low-income communities (LICs).

This report begins by describing the Fund’s history, current appropriations, and each of its programs. A description of the Fund’s process of certifying certain financial institutions to be eligible for the Fund’s program awards follows. The next section provides an overview of each program’s purpose, use of award proceeds, eligibility criteria, and relevant issues for Congress.

The final section analyzes four policy considerations of congressional interest, regarding the Fund and the effective use of federal resources to promote economic development.

See also: Community Development Block Grants: Funding Issues in the 113th Congress (PDF)

CRS — Assistance to Firefighters Program: Distribution of Fire Grant Funding

April 17, 2014 Comments off

Assistance to Firefighters Program: Distribution of Fire Grant Funding (PDF)
Source: Congressional Research Service (via National Agricultural Law Center)

The Assistance to Firefighters Grant (AFG) Program, also known as fire grants or the FIRE Act grant program, was established by Title XVII of the FY2001 National Defense Authorization Act (P.L. 106-398). Currently administered by the Federal Emergency Management Agency (FEMA), Department of Homeland Security (DHS), the program provides federal grants directly to local fire departments and unaffiliated Emergency Medical Services (EMS) organizations to help address a variety of equipment, training, and other firefighter-related and EMS needs. A related program is the Staffing for Adequate Fire and Emergency Response Firefighters (SAFER) program, which provides grants for hiring, recruiting, and retaining firefighters.

The fire grant program is now in its 14th year. The Fire Act statute was reauthorized in 2012 (Title XVIII of P.L. 112-239) and provides new guidelines on how fire grant money should be distributed. There is no set geographical formula for the distribution of fire grants—fire departments throughout the nation apply, and award decisions are made by a peer panel based on the merits of the application and the needs of the community. However, the law does require that fire grants be distributed to a diverse mix of fire departments, with respect to type of department (paid, volunteer, or combination), geographic location, and type of community served (e.g., urban, suburban, or rural).

Unemployment among Doctoral Scientists and Engineers Increased but Remained Below the National Average

April 17, 2014 Comments off

Unemployment among Doctoral Scientists and Engineers Increased but Remained Below the National Average
Source: National Science Foundation

In 2010, an estimated 805,500 individuals in the United States held research doctoral degrees in science, engineering, and health (SEH) fields, an increase of 6.2% from 2008. Of these individuals, 709,700 were in the labor force, which includes those employed full time or part time and those actively seeking work (i.e., unemployed). The unemployment rate for SEH doctorate recipients was 2.4% in October 2010, up from 1.7% in October 2008 and similar to the rate in October 2003 (table 1). Moreover, the 2010 unemployment rate of the SEH doctoral labor force was about one-third of the October 2010 unemployment rate for the general population aged 25 years or older (8.2%).

CBO — Report on the Troubled Asset Relief Program—April 2014

April 17, 2014 Comments off

Report on the Troubled Asset Relief Program—April 2014
Source: Congressional Budget Office

In October 2008, the Emergency Economic Stabilization Act of 2008 (Division A of Public Law 110-343) established the Troubled Asset Relief Program (TARP) to enable the Department of the Treasury to promote stability in financial markets through the purchase and guarantee of “troubled assets.” Section 202 of that legislation, as amended, requires the Office of Management and Budget (OMB) to submit annual reports on the costs of the Treasury’s purchases and guarantees of troubled assets. The law also requires CBO to prepare its own assessment of the TARP’s costs within 45 days of OMB’s report. That assessment must discuss three elements:

  • The costs of purchases and guarantees of troubled assets,
  • The information and valuation methods used to calculate those costs, and
  • The impact on the federal budget deficit and debt.

To fulfill its statutory requirement, CBO has prepared this report on the TARP’s transactions that were completed, outstanding, or anticipated as of March 12, 2014. By CBO’s estimate, $438 billion of the initially authorized $700 billion will be disbursed through the TARP, including $423 billion that has already been disbursed and $15 billion in additional projected disbursements. CBO’s current estimate of the cost to the federal government of the TARP’s transactions (also referred to as the subsidy cost), which accounts for the realized costs of completed transactions and the estimated costs of outstanding and anticipated transactions, amounts to $27 billion (see the table below).

CRS — Brazil: Political and Economic Situation and U.S. Relations

April 17, 2014 Comments off

Brazil: Political and Economic Situation and U.S. Relations (PDF)
Source: Congressional Research Service (via National Agricultural Law Center)

The United States has traditionally enjoyed cooperative relations with Brazil, which is the seventh-largest economy in the world and is recognized by the Obama Administration’s National Security Strategy as an emerging center of influence. Administration officials have often highlighted Brazil’s status as a multicultural democracy, referring to the country as a natural partner that shares values and goals with the United States. Bilateral ties have been strained from time to time, however, as the countries’ occasionally divergent national interests and independent foreign policies have led to disagreements. U.S.-Brazilian relations have been particularly strained over the past year as a result of alleged National Security Agency (NSA) activities inside Brazil. Nevertheless, the countries continue to engage on issues such as trade, energy, security, racial equality, and the environment.

CBO — An Analysis of the President’s 2015 Budget

April 17, 2014 Comments off

An Analysis of the President’s 2015 Budget
Source: Congressional Budget Office

The President’s proposals would, relative to CBO’s current-law baseline, boost deficits from 2014 through 2016 but reduce them from 2017 through 2024, CBO and JCT estimate. Deficits would total $6.6 trillion between 2015 and 2024, $1.0 trillion less than the cumulative deficit in CBO’s baseline.

Federal debt held by the public would equal 74 percent of GDP at the end of 2024, the same as it is expected to be at the end of 2014.

The Five Most Costly Children’s Conditions, 2011: Estimates for U.S. Civilian Noninstitutionalized Children, Ages 0-17

April 17, 2014 Comments off

The Five Most Costly Children’s Conditions, 2011: Estimates for U.S. Civilian Noninstitutionalized Children, Ages 0-17
Source: Agency for Healthcare Research and Quality

This Statistical Brief presents data from the Household Component of the Medical Expenditure Panel Survey (MEPS-HC) regarding medical expenditures associated with the top five most costly conditions for children in 2011. These top five conditions–mental disorders; asthma/chronic obstructive pulmonary disease (COPD); trauma-related disorders; acute bronchitis and upper respiratory infections (URI); and otitis media (ear infections)–were determined by totaling and ranking the expenses for all medical care delivered in 2011.

CRS — Small Business Administration Trade and Export Promotion Programs

April 17, 2014 Comments off

Small Business Administration Trade and Export Promotion Programs (PDF)
Source: Congressional Research Service (via National Agricultural Law Library)

According to Census data, approximately 1% of small businesses in the United States currently export. With roughly three-quarters of world purchasing power and almost 95% of world consumers living outside of U.S. borders, more attention is being paid to the potential of small business export promotion programs to grow small businesses and contribute to the national economic recovery. In addition, some Members of Congress believe that the contributions of small businesses to commercial innovation and economic growth could be enhanced through greater access to growing international markets.

Consistent with these policy goals, the Small Business Administration (SBA) provides export promotion and financing services to small businesses through its loan guarantee programs, management and training programs, and other initiatives. SBA’s Office of International Trade (OIT) coordinates these activities as it assists with four stages of export promotion: (1) identifying small businesses interested in export promotion; (2) preparing small businesses to export; (3) connecting small businesses to export opportunities; and (4) supporting small businesses once they find export opportunities.

Student Loan Safety Nets: Estimating the Costs and Benefits of Income-Based Repayment

April 17, 2014 Comments off

Student Loan Safety Nets: Estimating the Costs and Benefits of Income-Based Repayment
Source: Brookings Institution

The plight of underemployed college graduates struggling to make their student loan payments has received a great deal of media attention throughout the recent economic recession. The primary safety net available to borrowers of federal loans facing unaffordable monthly payments is income-based repayment, in which borrowers make monthly payments based on their earnings rather than a traditional schedule of flat payments.

The importance of these programs is widely recognized. How much these programs will cost and how the benefits will be distributed among borrowers, however, is not well understood— in large part because these costs and benefits will be realized over multiple decades. Without this knowledge, it is difficult to know whether these programs are meeting the goal of effectively and efficiently protecting borrowers without creating significant unintended consequences.

This report seeks to fill that gap by providing some of the first detailed evidence about the predicted costs and benefits of existing income-based repayment programs. Authors Beth Akers and Matthew Chingos develop an empirical framework for understanding the costs and benefits of these programs and use simulation methods to apply this framework to a nationally representative sample of bachelor’s degree recipients. These methods cannot accurately estimate the overall cost of the programs, but they provide fairly robust estimates of the relative cost of different program components, and of the share of benefits received by different groups of borrowers.

CRS — Small Business Administration Microloan Program

April 17, 2014 Comments off

Small Business Administration Microloan Program (PDF)
Source: Congressional Research Service (via National Agricultural Law Library)

The Small Business Administration’s (SBA’s) Microloan program provides direct loans to qualified non-profit intermediary Microloan lenders who, in turn, provide “microloans” of up to $50,000 to small business owners, entrepreneurs, and non-profit child care centers. It also provides marketing, management, and technical assistance to Microloan borrowers and potential borrowers. The program was authorized in 1991 as a five-year demonstration project and became operational in 1992. It was made permanent, subject to reauthorization, in 1997.

The SBA’s Microloan program is designed to assist women, low-income, veteran, and minority entrepreneurs and small business owners and other individuals possessing the capability to operate successful business concerns by providing them small-scale loans for working capital or the acquisition of materials, supplies, or equipment.

In FY2013, Microloan intermediaries provided 4,426 Microloans amounting to $51.2 million. The average Microloan was $11,569 and had a 7.76% interest rate.

CRS — Trade Adjustment Assistance for Farmers

April 17, 2014 Comments off

Trade Adjustment Assistance for Farmers (PDF)
Source: Congressional Research Service (via National Agricultural Law Library)

The Trade Adjustment Assistance for Farmers (TAAF) program provides technical assistance and cash benefits to producers of agricultural commodities and fishermen who experience adverse economic effects caused by increased imports. Congress first authorized this program in 2002, and made significant changes to it in the 2009 economic stimulus package (P.L. 111-5). The 2009 revisions were intended to make it easier for commodity producers and fishermen to qualify for program benefits, and provided over $200 million in funding through December 2010. Subsequently, P.L. 112-40 (enacted in October 2011) authorized $202.5 million through December 2013. No program activity occurred, because Congress did not appropriate funds.

The U.S. Department of Agriculture (USDA) is required to follow a two-step process in administering TAAF program benefits. First, a group of producers must be certified eligible to apply. Second, a producer in a certified group must meet specified requirements to be approved to receive technical assistance and cash payments.

CRS — Farm Commodity Provisions in the 2014 Farm Bill (P.L. 113-79)

April 17, 2014 Comments off

Farm Commodity Provisions in the 2014 Farm Bill (P.L. 113-79) (PDF)
Source: Congressional Research Service (via National Agricultural Law Library)

The farm commodity program provisions in Title I of the Agricultural Act of 2014 (P.L. 113-79, the 2014 farm bill) include three types of support for crop years 2014-2018:

+ Price Loss Coverage (PLC) payments, which are triggered when the national average farm price for a covered commodity (e.g., wheat, corn, soybeans, rice, and peanuts) is below its statutorily fixed “reference price”;

+ Agriculture Risk Coverage (ARC) payments, as an alternative to PLC, which are triggered when crop revenue is below its guaranteed level based on a multiyear moving average of historical crop revenue; and

+ Marketing Assistance Loans (MALs), which offer interim financing for the loan commodities (covered crops plus several others) and, if prices fall below loan rates set in statute, additional low-price protection, sometimes paid as loan deficiency payments (LDPs).

CRS — Bonus Depreciation: Economic and Budgetary Issues

April 17, 2014 Comments off

Bonus Depreciation: Economic and Budgetary Issues (PDF)
Source: Congressional Research Service (via National Agricultural Law Center)

The Tax Extenders Act of 2013 (S. 1859), which would extend expiring tax provisions for a year, includes bonus depreciation. The temporary provisions enacted in the past for only a year or two and extended multiple times are generally referred to collectively as the “extenders.” One reason advanced for these temporary provisions is that time is needed to evaluate them. Most of these provisions, however, have been extended multiple times, and some suggest that these provisions are actually permanent but are extended a year or two at a time because permanent provisions would significantly increase the costs in the budget horizon. Historically, bonus depreciation has not been a traditional “extender.”

Bonus depreciation allows half of equipment investment to be deducted immediately rather than depreciated over a period of time. Bonus depreciation was enacted for a specific, short-term purpose: to provide an economic stimulus during the recession. Most stimulus provisions have expired. Bonus depreciation has been in place six years (2008-2013), contrasted with an earlier use of bonus depreciation in place for three years. Is bonus depreciation temporary or permanent? The analysis of bonus depreciation differs for a temporary stimulus provision, compared to a permanent provision that can affect the size and allocation of the capital stock.

CRS — Drinking Water State Revolving Fund (DWSRF): Program Overview and Issues

April 17, 2014 Comments off

Drinking Water State Revolving Fund (DWSRF): Program Overview and Issues (PDF)
Source: Congressional Research Service (via National Agricultural Law Center)

In the Safe Drinking Water Act (SDWA) Amendments of 1996, Congress authorized a drinking water state revolving loan fund (DWSRF) program to help public water systems finance infrastructure projects needed to comply with federal drinking water regulations and to meet the act’s health objectives. Under this program, states receive annual capitalization grants to provide financial assistance (primarily subsidized loans) to public water systems for drinking water projects and other specified activities. Through June 2012, Congress had provided $14.7 billion for the DWSRF program, and combined with the 20% state match, bond proceeds, and other funds, the program generated $23.6 billion in assistance and supported 9,990 projects.

The latest Environmental Protection Agency (EPA) survey of capital improvement needs for public water systems indicates that these water systems need to invest $384.2 billion on infrastructure improvements over 20 years to ensure the provision of safe tap water. EPA reports that, although all of the identified projects promote the public health objectives of the SDWA, just $42.0 billion (10.9%) of reported needs are attributable to SDWA compliance.

New From the GAO

April 17, 2014 Comments off

New GAO Reports
Source: Government Accountability Office

1. Army Modular Force Structure: Annual Report Generally Met Requirements, but Challenges in Estimating Costs and Assessing Capability Remain. GAO-14-294, April 16.
http://www.gao.gov/products/GAO-14-294
Highlights - http://www.gao.gov/assets/670/662577.pdf

2. Foreign Aid: USAID Has Increased Funding to Partner-Country Organizations but Could Better Track Progress. GAO-14-355, April 16.
http://www.gao.gov/products/GAO-14-355
Highlights - http://www.gao.gov/assets/670/662597.pdf

3. Defense Contracting: DOD’s Use of Class Justifications for Sole-Source Contracts. GAO-14-427R, April 16.
http://www.gao.gov/products/GAO-14-427R

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