NBC's Kristen Welker reports on Thursday's budget talks between President Obama and congressional leaders.
By msnbc.com's Tom Curry: With congressional leaders at the White House on Thursday for another debt limit parley with President Obama, here are some basic numbers to keep the debate in perspective:
As of the end of the day Tuesday, the Treasury had a cash balance of $78 billion.
Last year at about the same point, Tuesday, July 6, 2010, it had a cash balance of $224 billion and a year earlier on July 6, 2009 it had a cash balance of $257 billion.
The Treasury and the Bipartisan Policy Center, an outside group, have each done estimates of the declining cash balance as the government creeps closer to the day – Aug. 2, according to the latest Treasury forecast – when the $14.29 trillion borrowing limit is reached and the Treasury has a zero cash balance.
It would then need to pay vendors, federal employees, etc. entirely out of the daily incoming cash flow.
In an analysis by former Treasury official Jay Powell, the Bipartisan Policy Center estimates that on Aug. 3, the day after the debt limit is likely to be reached, $12 billion in revenues would come in on that day, but the government would need to pay out $32 billion in benefits and to pay bills.
To avoid a cash crunch, Congress and Obama need to clinch a deal: change federal programs so as to cut deficits in future years, in return for Congress voting to raise the borrowing limit.
There were reports Thursday that Obama would seek deficit reductions of $4 trillion. That was the approximate number recommended by the Bowles-Simpson fiscal commission which the president appointed early last year.
According to the Congressional Budget Office’s baseline projection, the cumulative deficits over the next ten years will be more than $6.7 trillion -- so a reduction of $4 trillion in future deficits would amount to nearly a 60 percent cut over that ten-year period.
But under the budget rules that govern CBO’s baseline, the forecasters must assume that income tax rates revert to their 2000 level, that the Alternative Minimum Tax is allowed to affect more and more middle-income taxpayers (something Congress has prevented in recent years), and that Congress makes the cuts it promised to make back in 1997 in payments to doctors in the Medicare program.
It’s probable that none of those things will happen. If they don’t, then the ten-year cumulative deficits will total nearly $12 trillion, CBO said. In that case, a $4 trillion cut would amount to a one-third cut in cumulative deficits.
A sticking point is how much of the deficit reduction should be in the form of spending cuts and how much in the form of higher revenues.
The increased revenues in any accord between Obama and congressional Republicans would most likely come not from increases in the top income tax rates, but by eliminating some tax credits and preferences – a course recommended by the Bowles-Simpson commission.
The two biggest tax preferences, according to the congressional Joint Committee on Taxation:
-- The exclusion from workers’ taxable income of their employers’ contributions for their health insurance premiums, tax-free compensation worth $117.3 billion this year.
-- The home mortgage interest deduction, worth $93.8 billion this year.
It would be surprising if either of those were part of a final accord between Obama and congressional leaders.
Due to the recession and nearly 14 million Americans still unemployed, revenues this year are still likely to be below where they were in 2007, when the government collected $2.568 trillion.
According to the CBO estimate released last March, the government will collect $2.23 trillion in revenue in the current fiscal year – 13 percent less than in 2007.
This year federal spending will amount to about 24 percent of gross domestic product while revenues will be 14.8 percent of GDP.
When Obama said to his Wednesday Twitter town hall audience, “We actually now have the lowest tax rates since the 1950s,” he was incorrect.
Today’s highest personal income tax rate, 35 percent, exceeds the top rate in 1992: 31 percent.
But he would have been correct to say that revenues as a percentage of GDP are the lowest since 1950, when they were 14.4 percent of GDP.