This chart illustrates the progressive structure of the federal income tax system as seen in the average tax rates (center column) computed from tax returns filed in 2007. For example, the top left block indicates that the top 1% of tax returns reported $2.0 trillion in adjusted gross income, which was 22.8% of the total adjusted gross income of $8.8 trillion for the year. The top right block indicates that $451 billion in income taxes was collected from that group, which amounted to 40.4% of the total $1.1 trillion of income taxes for the year.

The progressivity of the income tax system is further demonstrated by the fact that the top 1% paid more income taxes ($451 billion) than the bottom 95% ($438 billion).

The Internal Revenue Service uses percentile categories (Top 1%, 95% – 99%, 90% – 95%, etc.) for purposes of analyzing income tax data. A total of 141,070,972 tax returns were filed by individuals in 2007. The IRS analyzes tax return statistics to determine various percentages. For example, this table indicates that the top 10% of taxpayers paid $794 billion, which accounted for 71.2% of the total income taxes paid by individuals in 2007.

The Monthly Treasury Statement of Receipts and Outlays of the United States Government is prepared by the Financial Management Service, Department of the Treasury. For the first nine months of fiscal year 2009, outlays have averaged approximately $316 billion per month, while receipts have averaged approximately $176 billion per month for an average deficit of $140 billion per month.

A particularly troubling aspect of this chart is that receipts did not exceed outlays in April of this year. April is typically the month of highest receipts because individual taxpayers file their tax returns and pay their remaining tax liabilities for the preceding calendar year in April. And self-employed individuals pay their first quarter estimated tax payments in April, also. Receipts in April 2008 totaled $403 billion (the single highest month on record) whereas receipts in April 2009 totaled $266 billion, a decline of 34% in tax receipts. Since 1981, there has only been one other year (1986) in which Outlays exceeded Receipts during April.

Washington – Bureau of Labor Statistics, July 2, 2009

Unemployment Rises Again In June

Nonfarm payroll employment continued to decline in June (-467,000), and the unemployment rate was little changed at 9.5 percent the Bureau of Labor Statistics of the U.S. Department of Labor reported on July 2, 2009. Job losses were widespread across the major industry sectors, with large declines occurring in manufacturing, professional and business services, and construction.

 The following sectors lost jobs in June:

• Manufacturing employment fell by 136,000 during June, and has declined by 1.9 million since the recession began in December 2007.
• Construction lost 79,000 jobs in June, and has fallen by 1.3 million during the same period.
• The professional and business services industry lost 118,000 jobs in June and 848,000 since the start of the recession.
• Jobs in motor vehicles and parts fell by 27,000. Since the recession began, employment in this sector has declined by 335,000, or about one-third of the total employment in December 2007.
• Financial activities employment continued to decline (also by 27,000 in June), with a loss of 489,000 jobs during the recession.
• Job losses at automobile dealerships totaled 9,000 in June.

The bright spot in employment continues to be health care, with an increase of 21,000 in June and an average increase of 21,000 per month during 2009.

CBO Updates Budget Deficit to $1.845 Trillion for 2009

Since the Congressional Budget Office (CBO) last issued its baseline projections in January 2009, the outlook for the budget deficit has deteriorated further. Enactment of stimulus legislation and omnibus appropriations, a worsening of the economic outlook, and other factors have increased CBO’s projections of the deficit by more than $400 billion in both 2009 and 2010 and by smaller amounts thereafter. As a result, if current policies remain the same, CBO now anticipates that the deficit will total almost $1.667 trillion (using the CBO baseline projection format). After updating its own baseline projection, CBO then analyzed the president’s budget for 2010 that contains further budget provisions for the current year which ends September 30, 2009. (By law, CBO’s baseline projection assumes that whatever laws are currently in effect will remain in effect. Therefore, the CBO’s baseline projection does not take into account the budget changes proposed by the president.) The CBO runs a separate analysis of the president’s budget to determine the projected deficit using the president’s proposals. Assuming that the changes proposed by the president are, in fact, enacted, CBO estimates that the 2009 budget deficit will total $1.845 trillion for the current year.

CBO Forecasts Massive Deficits

In its annual report — The Budget and Economic Outlook — released January 7, 2009, the Congressional Budget Office (CBO) notes that:

“The sharp downturn in housing markets across the country, which undermined the solvency of major financial institutions and severely disrupted the functioning of financial markets, has led the United States into a recession that will probably be the longest and the deepest since World War II. The Congressional Budget Office anticipates that the recession—which began about a year ago—will last well into 2009.”
 
In response to this situation, the Bush Administration and the Obama Administration
have taken unprecedented measures to stabilize the financial system and stimulate the economy. These actions will produce enormous budget deficits for fiscal years 2009 and 2010 and perhaps beyond.
 
This chart illustrates the magnitude and components of the 2009 deficit.
 
¹Starting with the actual deficit of $455 billion for the fiscal year ended September 30, 2008, CBO projects that worsening economic conditions will cause the deficit to increase by $313 billion (before taking into account the bailout of Fannie Mae and Freddie Mac, the Troubled Asset Relief Program, and the American Recovery and Reinvestment Act of 2009). Of this $313 billion, CBO estimates that roughly $250 billion is attributable to falling federal tax receipts and additional spending on some programs, such as those providing unemployment insurance and the Supplemental Nutrition Assistance Program (formerly known as the Food Stamp program).
 
² The projected deficit for 2009 incorporates CBO’s estimate of the cost to the federal government of the Fannie Mae and Freddie Mac takeovers. Because those entities were created and chartered by the government, are responsible for implementing certain government policies, and are currently under the direct control of the federal government, CBO has concluded that their operations should be reflected in the federal budget. Recognizing the cost of the takeovers adds about $200 billion (in discounted present-value terms) to the deficit this year, reflecting the long-term net cost of the more than $5 trillion in credit guarantees issued and loans held by those entities at the start of the fiscal year. In addition, CBO estimates the cost of Fannie Mae’s and Freddie Mac’s new credit activity in 2009 will total $38 billion.
 
³ According to CBO’s estimates, more than $180 billion will be recognized as part of the deficit this year to reflect the present value of the net cost of transactions under the Troubled Asset Relief Program, which was created in the fall of 2008. That cost is the purchase price minus the present value, adjusted for market risk, of any estimated future earnings from holding purchased assets and the proceeds from the eventual sale of them. The TARP has the authority to enter into agreements to purchase assets totaling up to $700 billion outstanding at any one time, but CBO believes that the net cost over time will be much less than that amount.
 
⁴ In a letter dated February 13, 2009 to Speaker of the House of Representatives Nancy Pelosi, the Director of the Congressional Budget Office, Douglas W. Elmendorf, released the results of CBO’s analysis of the budget impact of the American Recovery and Reinvestment Act of 2009. The analysis indicated that approximately $185 billion of the $789.5 billion of spending and tax cuts would be recognized during the remainder of fiscal year 2009. The largest impact will occur in 2010 with $399 billion added to the deficit for that year.

By a vote of 61 – 37 the U.S. Senate passed the American Recovery and Reinvestment Act of 2009. More troubling than the amount of pork contained in the bill was a provision that will affect “every individual in the United States,” and dramatically alter the way that doctors practice medicine. The bill allocates $20 billion to establish the Office of the National Coordinator of Health Information Technology. The role of the coordinator goes much further than computerizing the health records of all Americans. As former Lieutenant Governor of New York, Becky McCaughey, points out in her commentary on Bloomberg.com, the new office will “monitor treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective.” See her article that triggered an avalanche of calls, emails and faxes to Capitol Hill.

For a look at the actual provision of the bill, click here.

There is still time, but not much, to get this provision removed during the reconciliation process between the House and Senate versions of the bill. The only way this will happen is for at least two of the three Republican senators who voted in favor of the bill to threaten to vote No if this provision is not removed. Let them know how you feel about government-run healthcare.

Send emails to the three senators through their websites:

Senator Susan Collins: Click here to email Senator Collins.

Senator Olympia Snowe: Click here to email Senator Stowe.

Senator Arlen Specter: Click here to email Senator Specter.

Washington – Bureau of Labor Statistics, February 6, 2009

Nonfarm payroll employment declined sharply in January, and the unemployment rate rose from 7.2% to 7.6% according to the Bureau of Labor Statistics of the U.S. Department of Labor. Payroll employment fell by 598,000 over the month. In January, job losses were large and widespread across most major industry sectors. The number of unemployed persons increased to 11.6 million in January. Over the past 12 months, the number of unemployed persons has grown by 4.1 million, and the unemployment rate has risen by 2.7 percentage points.

The unemployment rates for most categories continued to trend upward for the month: adult men (7.6% from 7.2%), adult women (6.2% from 5.9%), whites (6.9% from 6.6%), blacks (12.6 % from 11.9%), and Hispanics (9.7% from 9.2%). The jobless rate for teenagers was unchanged at 20.8%.

The following sectors lost jobs in January

• Manufacturing employment fell by 207,000, the largest 1-month decline since October 1982.
• Construction lost 111,000 jobs.
• The temporary help industry lost 76,000 jobs.
• Retail trade employment fell by 45,000.
• Transportation and warehousing lost 44,000 jobs.
• Employment in financial activities declined by 42,000 and by 388,000 from a peak in December 2006.

Health care continued its upward trend in January with a gain of 19,000. Employment gains in the industry averaged over 30,000 per month in 2008. Employment in private education rose by 33,000 over the month.

Gross Domestic Product (“GDP”) is one of the most comprehensive and closely watched economic statistics. It is used by the White House and Congress to prepare the federal budget, by the Federal Reserve to formulate monetary policy, by Wall Street as an indicator of economic activity, and by the business community to prepare forecasts of economic performance that provide the basis for production, investment, and employment planning.
 
GDP is a measure of the goods and services produced by labor and property located within the United States. Thus, GDP includes the output of U.S. offices or establishments of foreign companies located in the United States, and it excludes the output of foreign offices or establishments of U.S. companies located outside the United States. This treatment aligns GDP with other key U.S. statistics associated with the domestic economy, such as population and employment.
 
This chart illustrates two measures of GDP: (1) Current Dollar GDP and (2) “Real” GDP. These titles are short notations for economic concepts that put each measurement into perspective. The first measurement—Current Dollar GDP—is the figure typically quoted in the media as the annual measure of GDP. The word current in this context means that the number is the amount that was actually computed for each year shortly after the end of that year. Thus, the GDP figure for each year consists not only of the amount of goods and services produced, it also reflects the changing value of the dollar.
 
The second measurement—real GDP—deflates the components of GDP to reflect changes in relative prices and in the composition of output over time. The process employed to arrive at this result is known as a “chain-type index.” This approach provides more accurate estimates of both real GDP growth and inflation than the previous method, usually referred to as a constant dollar measurement. To make matters more confusing, in addition to being referred to as “Real” GDP, the second measurement is sometimes referred to simply as chained dollars when used in association with current dollars. In this context, the word chained means multiplied to form a time series that adjusts GDP from its current dollar presentation.
 
In order to produce a chain-type index, a base year must be selected. The year 2000 is currently used by Bureau of Economic Analysis as the base year. Current GDP for the year 2000 was $9.817 trillion. Setting real GDP equal to $9.817 trillion for the year 2000 and then chaining the GDP data to that year produces the “Real” GDP curve shown in the chart. Therefore, it is not a coincidence that Current Dollar GDP and “Real” GDP both equal $9.817 trillion in 2000.
 
Note: The data used to construct this chart consist of annual data. Thus, while real GDP growth was negative for the last two quarters of 2008, overall real GDP grew at a rate of 1.3 percent in calendar year 2008 (that is, from the 2007 annual level to the 2008 annual level), compared with an increase of 2.0 percent in 2007. For a discussion of quarterly GDP data, see the Economic Indicators section of this website.