in the study. Throughout the report—unless otherwise noted—dollars are nominal rather than adjusted for inflation, budget amounts expressed as percentages of GDP are relative to estimates of GDP in the year referenced, and years refer to federal fiscal years (ending September 30 of the calendar year).

  

2. Because of its effect relative to tax provisions, lower inflation reduces tax collections in real terms. This effect is partially offset, however, because lower inflation reduces automatic cost-of-living adjustments in some federal spending programs, such as Social Security.

  

3. The federal government’s annual borrowing needs do not exactly match the deficit or surplus in the same year. In fiscal 2008, for example, the government borrowed $768 billion in 2008 although the deficit was just $455 billion. Of the seeming discrepancy of $313 billion, $300 billion went to a special “Supplementary Asset Program” designed to soak up excess liquidity at the Federal Reserve System in extraordinary circumstances. Most of the rest went to the financing accounts established to extend direct loans, chiefly student loans. For details, see U.S. Department of the Treasury (2008:Table 6). The special interventions associated with the downturn, including assistance to Fannie Mae and Freddie Mac in conservatorship and some transactions of the Treasury Asset Relief Program (TARP) in 2009 and beyond, including cash repayments that reduce borrowing needs, will create even larger temporary differences between net borrowing and the deficits recorded in the same years.

  

4. The effect on revenues of extending the 2001 and 2003 tax cuts (along with indexation after 2009 of the Alternative Minimum Tax and the extension of other, much smaller expiring provisions) beyond their current legal expiration has been calculated by the Congressional Budget Office (2009e:6; Table 2-1) by comparing revenue estimates for 2020 and other selected years to 2080. In 2020, CBO estimates, revenues would be reduced from $20.3 trillion to $18.6 trillion.

  

5. Over the past century or so, industrial societies have dedicated a growing share of their growing wealth to social protection of vulnerable populations. Affluent governments now spend more on social programs than at any time in history (Organisation for Economic Co-operation and Development, 2008a). Public commitments to provide minimum financial support and services to the most vulnerable people in a country, sometimes termed the “social safety net,” supplement or in some cases replace traditional family and community responsibilities, which have been weakened with changes in family structure related to economic modernization and other social changes. Some conservatives argue that, by substituting for personal responsibility, programs aimed at helping the poorest families have sometimes weakened family structure.

  

6. The exclusion of employer contributions to health premiums and care for their employees is now the single largest tax expenditure, as measured by the revenue that would be collected if this provision were ignored in calculating employer taxes. It is estimated to have reduced federal income tax revenue in 2008 by at least $117 billion (Joint Committee on Taxation, 2008a).

  

7. For these analyses, GNP is more useful than GDP, because GNP measures net income of residents in the United States after deducting payments to foreigners.

  

8. For details of the CBO analysis, including estimates of what would happen by offsetting this spending growth entirely through cuts in other programs, see Congressional Budget Office (2008g).

  

9. Similarly, a sensitivity analysis for the Social Security Trustees shows that if immigration were one-third higher in the future than in their standard projection, the projected negative balance of the trust fund after 75 years would be reduced from −2.00 to −1.81 percent of taxable payroll (Social Security Administration, 2009d).



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