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Publications
Author: Penner, Rudolph G.
Do We Need a Value-Added Tax to Solve Our Long-Run Budget Problems? (Occasional Paper)
Author(s):
Rudolph G. Penner
The U.S. budget is on an unsustainable path. That is because Social Security, Medicare, and Medicaid, which together constituted almost one half of noninterest spending before the recent stimulus plan, are all growing faster than tax revenues. If these programs are not reformed, tax burdens raised, or other spending decimated, deficits and the national debt will explode. It is difficult to imagine solving the entire budget problem by slowing spending growth, because benefits would then be far below those previously promised. It is equally unlikely that tax increases could solve the whole problem because the tax burden would then be so far above any ever experienced by Americans. To the extent that tax burdens are to be increased, there are three options. Tax rates could be raised in the existing system, but that would be extremely inefficient. Tax reform might raise revenues more efficiently, but that is excruciatingly difficult politically. That leaves the possibility of a brand new tax and a VAT is a very likely candidate.
Published: 06/23/09
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Economic Minefields (Commentary)
Author(s):
Rudolph G. Penner
Institute Fellow Rudy Penner questions the costs and after-effects of heavy economic stimulus. There is a path out of our misery, he says, but it is surrounded by big and little mines, some of which have been planted by public policy.
Published: 04/02/09
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Federal Taxes and the Elderly (Article)
Author(s):
Rudolph G. Penner
The article considers special federal tax provisions affecting the elderly. It examines the taxation of Social Security, private retirement accounts, estate taxation and other provisions of the law that mention age. It also analyzes how the elderly might be affected by tax increases necessitated by the dismal long-run budget outlook. In particular, it looks at the possibility that we shall become more reliant on consumption taxes.
Published: 02/03/09
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Addressing Short- and Long-Term Fiscal Challenges: Testimony before the Senate Budget Committee (Testimony)
Author(s):
Rudolph G. Penner
The prevalent theme in recent discussions of stimulus is that the risk of doing too little exceeds the risk that we shall do too much. But we must ask how much of too much we can tolerate. The risks of overdoing it are severe and are not emphasized enough in the current discussion. The main worries are that the speed with which the national debt is being increased could eventually cause a very rapid rise in interest rates on Treasuries and that federal, state and local bureaucracies may not be able to manage the proposed huge increase in spending. Turning to the long run, the testimony discusses the need to address short- and long-term budget problems simultaneously and the prospects for using the Conrad-Gregg commission to do so.
Published: 01/21/09
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Sunday Forum: The Debt Bomb (Opinion)
Author(s):
Rudolph G. Penner
Pittsburgh Post-Gazette op-ed, September 28, 2008. The current financial crisis poses a severe threat to the economy, but it also creates a tremendous opportunity, writes Rudolph Penner in the Pittsburgh Post-Gazette. It gives politicians cover for undertaking painful actions to get the long-run deficit under control-actions that should have been taken long ago.
Published: 09/28/08
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Budgeting for Capital Investment: Testimony Before the U.S. House of Representatives Committee on Transportation and Infrastructure (Testimony)
Author(s):
Rudolph G. Penner
The unified budget of the U. S. government is, in most respects, a cash budget. It is somewhat biased against public investment, because the benefits of such investments accrue over a period of time whereas the cash outlay is immediate. This testimony looks at options for directing more funds to highways, mass transit, and other public investments. It examines higher fuel taxes, tolls and congestion fees; capital budgeting; infrastructure banks; a capital revolving fund; public-private partnerships; and approaches to improving the efficiency of current grants and subsidies. It concludes that tolls and congestion fees are very promising as are public-private partnerships. A capital revolving fund would be useful for agencies that only invest occasionally. A capital budget and infrastructure banks are less desirable.
Published: 06/13/08
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Taking Back Our Fiscal Future (Occasional Paper)
Author(s):
Joseph Antos , Robert Bixby , Stuart Butler , Paul Cullinan , Alison Fraser , William Galston , Ron Haskins , Julia Isaacs , Maya MacGuineas , Will Marshall , Pietro Nivola , Rudolph G. Penner , Robert D. Reischauer , Alice M. Rivlin , Isabel V. Sawhill , C. Eugene Steuerle
The authors of this paper—longtime federal budget and policy experts—were drawn together by a deep concern about the nation's long-term fiscal outlook. Despite diverse philosophies and political leanings, they found solid common ground and agree that unsustainable deficits in the federal budget threaten the health and vigor of the American economy and the first step toward establishing budget responsibility is to reform the budget decision process so that the major drivers of escalating deficits—Social Security, Medicare, and Medicaid—are no longer on autopilot. The paper provides specific policy recommendations and outlines the reasons action is critical.
Published: 03/31/08
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How Much Federal Spending Is Uncontrollable? (Article/Tax Facts)
Author(s):
Rudolph G. Penner , Julianna Koch
Discussions of the federal budget often refer to mandatory spending — on Social Security, Medicare, and similar programs — as "uncontrollable." In contrast with discretionary programs that Congress usually funds with annual appropriations, entitlement spending is determined by permanent laws specifying who qualifies for what benefits. This article examines changes in the percentage distribution of federal outlays since 1962. It highlights the rapid growth in mandatory spending driven by increased spending for health and retirement programs and the contrasting decline in defense spending as a share of total spending.
Published: 07/16/07
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Can Congress Use Budget Rules To Improve Tax Policy? (Article)
Author(s):
Rudolph G. Penner
Ovid said that "Gods have their own rules." So does Congress--a vast multitude of rules. The history of the Budget and Impoundment Control Act of 1974 and the Budget Enforcement Act of 1990 is one in which rules have been promulgated; Congress has found loopholes in those rules; more rules have been designed to plug the loopholes; and then the process starts over again. The end result is a set of budget rules that is so complicated that no single human understands them all. The whole panoply of rules associated with the congressional budget process needs a critical reexamination.
Published: 10/23/06
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Tax Policy and Saving (Article)
Author(s):
Rudolph G. Penner
Economists have provided valuable insights into human behavior, and as a result, are pretty good at policy analysis. They are not very good at explaining savings, however. Perhaps that is because there is much that is irrational in saving behavior and economists are not good at irrationality. Whether irrational or not, we know that within each income group there are inveterate savers and inveterate spenders, and that may be important in trying to figure out how tax policy affects saving behavior.
Published: 05/08/06
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