Updated Budget Projections: Fiscal Years 2013 to 2023
Source: Congressional Budget Office
If the current laws that govern federal taxes and spending do not change, the budget deficit will shrink this year to $642 billion, CBO estimates, the smallest shortfall since 2008. Relative to the size of the economy, the deficit this year—at 4.0 percent of gross domestic product (GDP)—will be less than half as large as the shortfall in 2009, which was 10.1 percent of GDP.
Because revenues, under current law, are projected to rise more rapidly than spending in the next two years, deficits in CBO’s baseline projections continue to shrink, falling to 2.1 percent of GDP by 2015. However, budget shortfalls are projected to increase later in the coming decade, reaching 3.5 percent of GDP in 2023, because of the pressures of an aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt. By comparison, the deficit averaged 3.1 percent of GDP over the past 40 years and 2.4 percent in the 40 years before fiscal year 2008, when the most recent recession began. During the next 10 years, both revenues and outlays are projected to be above their 40-year averages as a percentage of GDP (see figure below).
Source: U.S. Department of Defense
Following Defense Secretary Chuck Hagel’s announcement yesterday that most Defense Department civilian employees will experience up to 11 furlough days from early July through September, senior defense officials emphasized their goal to reduce adverse effects on the workforce and the mission.
Speaking to Pentagon reporters on background, two senior defense officials discussed details of the furlough, exemptions and stressed their intent to lessen its effects.
One official said it appears that about 15 percent — 120,000 of the department’s roughly 800,000 civilian employees — will be exempt from the furlough, and that number could rise once issues involving intelligence personnel are resolved.
While the furloughs will save the Defense Department $1.8 billion, “it’s not something that we wanted to do,” the official said.
Part of the department’s plan to reduce the furlough’s effects is to ask Congress allow shifting funds from one account to another, the official said.
The services previously had taken steps in an attempt to avoid furlough, the official noted, with the Air Force stopping flights for 12 combat-coded squadrons and the Army canceling most of its combat training rotations.
While all the services will experience furloughs, the official said, the Navy is getting a critical exemption for its civilian employees that work in shipyards and do nuclear maintenance, citing long periods required for maintenance and very little ability to catch up with maintenance on submarines and carriers.
The official acknowledged furloughs will reduce efficiency across the department.
+ Furlough memorandum (PDF)
New GAO Reports
Source: Government Accountability Office
1. Defense Headquarters: DOD Needs to Periodically Review and Improve Visibility Of Combatant Commands’ Resources. GAO-13-293, May 15.
Highlights – http://www.gao.gov/assets/660/654639.pdf
2. Strategic Sourcing: Leading Commercial Practices Can Help Federal Agencies Increase Savings When Acquiring Services. GAO-13-417, April 15.
Highlights – http://www.gao.gov/assets/660/653771.pdf
3. Temporary Assistance For Needy Families: Potential Options to Improve Performance and Oversight. GAO-13-431, May 15.
Highlights – http://www.gao.gov/assets/660/654616.pdf
4. Financial Audit: Congressional Award Foundation’s Fiscal Years 2012 and 2011 Financial Statements. GAO-13-554, May 15.
CREW Releases New Report Examining the Influence of High Frequency Traders in Washington
Source: Citizens for Responsibility and Ethics in Washington (CREW)
Today, Citizens for Responsibility and Ethics in Washington (CREW) released a new report, Rise of the Machines, detailing the growing political influence of high frequency traders in the nation’s capital. High frequency trading, a complicated and controversial method of securities trading, has begun drawing scrutiny from government regulators, prompting skyrocketing lobbying spending and campaign contributions by the industry.
CREW studied the lobbying and campaign contribution records of 48 companies that specialize in high frequency trading. Between the 2008 and 2012 election cycles, these firms’ campaign contributions soared by a staggering 673 percent, up from $2.1 million during the 2008 election cycle to $16.1 million during the 2012 cycle. Over this time period, these firms contributed more than $21 million to federal candidates, party committees, PACs, and super PACs.
Additionally, since 2008, these firms have spent more than $10 million lobbying Congress, the Securities and Exchange Commission, and the Commodity Futures Trading Commission. These companies’ total lobbying spending jumped 93 percent between 2008 and 2012, from $1.4 million to $2.7 million. The biggest single-year increase came between 2009 and 2010, while Congress debated heavily lobbied provisions of what would eventually become the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Treasury Inspector General for Tax Administraion — Inappropriate Criteria Were Used to Identify Tax-Exempt Applications for Review
Inappropriate Criteria Were Used to Identify Tax-Exempt Applications for Review (PDF)
Source: Treasury Inspector General for Tax Administration\
IMPACT ON TAXPAYERS
Early in Calendar Year 2010, the IRS began using inappropriate criteria to identify organizations applying for tax-exempt status to review for indications of significant political campaign intervention. Although the IRS has taken some action, it will need to do more so that the public has reasonable assurance that applications are processed without unreasonable delay in a fair and impartial manner in the future.
WHY TIGTA DID THE AUDIT
TIGTA initiated this audit based on concerns expressed by members of Congress. The overall objective of this audit was to determine whether allegations were founded that the IRS: 1) targeted specific groups applying for tax-exempt status, 2) delayed processing of targeted groups’ applications, and 3) requested unnecessary information from targeted groups.
WHAT TIGTA FOUND
The IRS used inappropriate criteria that identified for review Tea Party and other organizations applying for tax-exempt status based upon their names or policy positions instead of indications of potential political campaign intervention. Ineffective management: 1) allowed inappropriate criteria to be developed and stay in place for more than 18 months, 2) resulted in substantial delays in processing certain applications, and 3) allowed unnecessary information requests to be issued.
Although the processing of some applications with potential significant political campaign intervention was started soon after receipt, no work was completed on the majority of these applications for 13 months. This was due to delays in receiving assistance from the Exempt Organizations function Headquarters office. For the 296 total political campaign intervention applications TIGTA reviewed as of December 17, 2012, 108 had been approved, 28 were withdrawn by the applicant, none had been denied, and 160 were open from 206 to 1,138 calendar days (some for more than three years and crossing two election cycles).
More than 20 months after the initial case was identified, processing the cases began in earnest. Many organizations received requests for additional information from the IRS that included unnecessary, burdensome questions (e.g., lists of past and future donors). The IRS later informed some organizations that they did not need to provide previously requested information. IRS officials stated that any donor information received in response to a request from its Determinations Unit was later destroyed.
WHAT TIGTA RECOMMENDED
TIGTA recommended that the IRS finalize the interim actions taken, better document the reasons why applications potentially involving political campaign intervention are chosen for review, develop a process to track requests for assistance, finalize and publish guidance, develop and provide training to employees before each election cycle, expeditiously resolve remaining political campaign intervention cases (some of which have been in process for three years), and request that social welfare activity guidance be developed by the Department of the Treasury.
In their response to the report, IRS officials agreed with seven of our nine recommendations and proposed alternative corrective actions for two of our recommendations. TIGTA does not agree that the alternative corrective actions will accomplish the intent of the recommendations and continues to believe that the IRS should better document the reasons why applications potentially involving political campaign intervention are chosen for review and finalize and publish guidance.
New GAO Reports and Testimony
Source: Government Accountability Office
1. Climate Change: Future Federal Adaptation Efforts Could Better Support Local Infrastructure Decision Makers. GAO-13-242, April 12.
Highlights – http://www.gao.gov/assets/660/653740.pdf
2. Data Center Consolidation: Strengthened Oversight Needed to Achieve Cost Savings Goal. GAO-13-378, April 23.
Highlights – http://www.gao.gov/assets/660/654091.pdf
3. Defense Infrastructure: Communities Need Additional Guidance and Information to Improve Their Ability to Adjust to DOD Installation Closure or Growth. GAO-13-436, May 14.
Highlights – http://www.gao.gov/assets/660/654598.pdf
1. Data Center Consolidation: Strengthened Oversight Needed to Achieve Billions of Dollars in Savings, by David A. Powner, director, information technology management issues, before the Subcommittee on Government Operations, House Committee on Oversight and Government Reform. GAO-13-627T, May 14.
Highlights – http://www.gao.gov/assets/660/654606.pdf
Source: National Research Council
The U.S. military does not believe its soldiers, sailors, airmen, and marines should be engaged in combat with adversaries on a "level playing field." Our combat individuals enter engagements to win. To that end, the United States has used its technical prowess and industrial capability to develop decisive weapons that overmatch those of potential enemies. In its current engagement—what has been identified as an "era of persistent conflict"— the nation’s most important weapon is the dismounted soldier operating in small units. Today’s soldier must be prepared to contend with both regular and irregular adversaries. Results in Iraq and Afghanistan show that, while the U.S. soldier is a formidable fighter, the contemporary suite of equipment and support does not afford the same high degree of overmatch capability exhibited by large weapons platforms—yet it is the soldier who ultimately will play the decisive role in restoring stability.
Making the Soldier Decisive on Future Battlefields establishes the technical requirements for overmatch capability for dismounted soldiers operating individually or in small units. It prescribes technological and organizational capabilities needed to make the dismounted soldier a decisive weapon in a changing, uncertain, and complex future environment and provides the Army with 15 recommendations on how to focus its efforts to enable the soldier and tactical small unit (TSU) to achieve overmatch.
Taxes: Afghan Government Has Levied Nearly a Billion Dollars in Business Taxes on Contractors Supporting U.S. Government Efforts in Afghanistan
Source: Special Inspector General for Iraq Reconstruction
Since 2008, the Afghan Ministry of Finance (MOF) has levied over $921 million in business taxes, and associated penalties, on 43 contractors that support U.S. government efforts in Afghanistan. DOD, INL, and USAID have agreements with the Afghan government that provide exemption from certain Afghan taxes. SIGAR identified instances where contractors were taxed despite these agreements. For example, $93 million of the $921 million represented taxes levied on business receipts and annual corporate income—a tax category that both the U.S. and Afghan governments have agreed should be exempt for contractors operating under covered agreements. SIGAR also identified instances in which the MOF assessed tax liabilities on contractors even though the contractors held MOF-issued tax exemption certificates. For example, the MOF issued Business Receipts Tax and annual corporate income tax assessments on some DOD contractors, even though the contractors should have been exempt from both tax categories. Three DOD contractors in SIGAR’s sample that held MOF-issued tax exemption certificates were improperly assessed nearly $59 million in business receipts and annual corporate income taxes. U.S. and MOF officials disagree about the tax-exempt status of subcontractors. MOF officials assert that the DOD and State INL agreements provide tax-exempt status only to prime contractors, and not subcontractors, whereas U.S. government officials contend that the agreements provide tax exemption for all non-Afghan companies (both prime and subcontractors) supporting U.S. government efforts. Given these ongoing disputes and the ambiguous nature of the MOF-issued assessments, the 43 contractors in SIGAR’s sample have paid approximately $67 million of the $921 million in total tax assessments, and most still face unresolved assessments. As a result of the outstanding assessments, the MOF has restricted contractors’ freedom of movement and refused to renew business licenses, and the Afghan government has even arrested some contractor personnel. The combined effect is the potential interruption of support to U.S. military operations.
Source: Center for Retirement Research at Boston College
The brief’s key findings are:
- State and local government employment dropped sharply during the Great Recession, unlike in previous recessions, and continues to decline even today.
- But this decline in public sector employment was less severe than that experienced by the private sector.
- Being a state/local worker reduced the probability of job loss by 2 percentage points, after controlling for education and other characteristics.
- While this relative job security is an attractive aspect of state/local employment, it is not enough to tip the balance of total compensation in favor of public workers.
Source: Center for Competitive Government (Temple University)
From press release (EurekAlert!):
As states continue to grapple with aging correctional facilities, overcrowding, underfunded retiree obligations and other constraints, new research from Temple University’s Center for Competitive Government finds that privately operated prisons can substantially cut costs – from 12 percent to 58 percent in long-term savings – while performing at equal or better levels than government-run prisons.
Temple economics Professors Simon Hakim and Erwin A. Blackstone analyzed government data from nine states that generally have higher numbers of privately held prisoners (Arizona, California, Florida, Kentucky, Mississippi, Ohio, Oklahoma, Tennessee and Texas), and Maine, which does not contract its corrections services. The professors calculated both short- and long-run savings per state, finding that contracted prisons generate significant savings without sacrificing quality.
"Contracts between private-prison operators and state governments can be very precise in terms of the outcomes the state expects," said Hakim, director of Temple’s Center for Competitive Government, which is affiliated with the Fox School of Business. "And contractors have an incentive to overshoot the performance metrics established by the state – lest they lose out to a higher-performing company on the next contract bid."
The study uses economic models to determine each state’s avoidable costs, which are compared to the contracted per diem rates charged by the private operators. The study also takes into account underfunded pensions and retiree healthcare costs – a critical issue, with the Pew Center on the States reporting in 2010 of a $1.38 trillion gap between states’ assets and their pension and healthcare retiree obligations.
In California, for example, the researchers estimated that contracted prison facilities save between 32 percent and 58 percent. In Maine, estimated savings in the short run (including operational costs, such as personnel and medical and food services) is 47 percent while long-run savings (which combine short-run costs with capital expenditures, such as facility modernization and financing) is estimated at 49 percent. Researchers said Maine’s substantial estimated savings could be attributed to that state’s lack of private-public competition and its small prisons that cannot exploit economies of scale.
New GAO Reports
Source: Government Accountability Office
1. Agricultural Research: Two USDA Agencies Can Enhance Safeguards against Project Duplication and Strengthen Collaborative Planning. GAO-13-255, April 12.
Highlights – http://www.gao.gov/assets/660/653753.pdf
2. Management Report: Improvements Are Needed to Enhance the Internal Revenue Service’s Internal Controls. GAO-13-420R, May 13.
3. President’s Emergency Plan for AIDS Relief: Shift toward Partner-Country Treatment Programs Will Require Better Information on Results. GAO-13-460, April 12.
Highlights – http://www.gao.gov/assets/660/653767.pdf
4. Defense Logistics: The Department of Defense’s Report on Strategic Seaports Addressed All Congressionally Directed Elements. GAO-13-511R, May 13.
Source: National Association of State Chief Information Officers
The National Association of State Information Officers (NASCIO) has launched a catalog of native mobile apps available from state governments for tablets and smartphones. Users can click on the interactive map to see what apps are offered by their state or territory. Apps are also searchable by a list of 20 different categories, including health and wellness, economic development, tax and payment information and education loans and grants.
“This tool offers a convenient way to see what other states are producing in terms of mobile apps, and allowing states to generate ideas for their own state or territory,” said Brenda Decker, NASCIO president and Nebraska CIO, in a statement. “Some states lead the way in mobile app development and can pose as models for those growing their mobile app capabilities.
Source: Tax Foundation
Retail sales taxes are one of the more transparent ways to collect tax revenue. While graduated income tax rates and brackets are complex and confusing to many taxpayers, the sales tax is easier to understand: people can reach into their pocket and see the rate printed on a receipt.
Less known, however, are the local sales taxes collected in 37 states. These rates can be substantial, so a state with a moderate statewide sales tax rate could actually have a very high combined state-local rate compared to other states. This report provides a population-weighted average of local sales taxes in each state in an attempt to give a sense of the statutory local rate for each state. See Table 1 at the end of this Fiscal Fact for the full state-by-state listing of state and local sales tax rates.
The National Security Agency just released “Untangling the Web,” an unclassified how-to guide to Internet search. It’s a sprawling document, clocking in at over 650 pages, and is the product of many years of research and updating by a NSA information specialist whose name is redacted on the official release, but who is identified as Robyn Winder of the Center for Digital Content on the Freedom of Information Act request that led to its release.
It’s a droll document on many levels. First and foremost, it’s funny to think of officials who control some of the most sophisticated supercomputers and satellites ever invented turning to a .pdf file for tricks on how to track down domain name system information on an enemy website. But “Untangling the Web” isn’t for code-breakers or wire-tappers. The target audience seems to be staffers looking for basic factual information, like the preferred spelling of Kazakhstan, or telephonic prefix information for East Timor.
Hat tip: PW
New GAO Reports
Source: Government Accountability Office
2. Superfund: EPA Should Take Steps to Improve Its Management of Alternatives to Placing Sites on the National Priorities List. GAO-13-252, April 9.
Highlights – http://www.gao.gov/assets/660/653647.pdf
New GAO Reports and Testimonies
Source: Government Accountability Office
1. Bureau of the Public Debt: Areas for Improvement in Information Systems Controls. GAO-13-416R, May 9.
2. Federal Reserve Banks: Areas for Improvement in Information Systems Controls. GAO-13-419R, May 9.
3. Preliminary Results of Work on FAA Facility Conditions and Workplace Safety. GAO-13-509R, May 9.
1. Transportation Worker Identification Credential: Card Reader Pilot Results Are Unreliable; Security Benefits Should Be Reassessed, by Stephen M. Lord, director, homeland security and justice, before the Subcommittee on Government Operations, House Committee on Oversight and Government Reform. GAO-13-610T, May 9.
2. Federal Retirement Processing: OPM Is Pursuing Incremental Information Technology Improvements after Canceling a Modernization Plagued by Management Weaknesses, by Valerie C. Melvin, director, information management and technology resource issues. GAO-13-580T, May 9.
Highlights – http://www.gao.gov/assets/660/654450.pdf
3. Missile Defense: Opportunity to Refocus on Strengthening Acquisition Management, by Cristina T. Chaplain, director, acquisition and sourcing management, before the Subcommittee on Strategic Forces, Senate Committee on Armed Services. GAO-13-604T, May 9.
Highlights – http://www.gao.gov/assets/660/654457.pdf