There are several other problems with CBO’s work:
- It assumes that the two-point payroll tax cut in effect during 2011 and 2012 will expire without renewal at the end of the year. Like other attempts at demand-side “stimulus,” the tax cut has stimulated nothing but higher deficits. Unfortunately, I have to agree with former Bush 43 press secretary Ari Fleischer, who wrote last year that “if the payroll-tax cut is extended, it will become permanent.” Well, it was extended, and though I’d like to be wrong, I think we’re stuck with it. That factor alone probably moves up our maxed-out date by a couple of years.
- Its estimates of federal tax collections are overoptimistic. It continues to assume double-digit percentage increases in receipts, even though that hasn’t happened since 2006, when you-know-who was in the White House. Through April, year-to-date collections were less than 6% ahead of last year’s comparable figure. My preliminary look at May indicates that its year-over-year increase will be smaller. If job growth continues to stagnate as it has during the past two months, so will money coming into the Treasury.
- Even worse, the employment growth which has occurred has been heavily weighted towards temps and part-timers. Since the recession’s official end, 737,000 of the 2.5 million seasonally adjusted jobs added have been at temporary help services, whose employees traditionally have made up about 2% of the workforce. At the same time, part-time employment is at an all-time high of 28 million. With “Taxmageddon” looming and the possibility of ObamaCare surviving Supreme Court review, there’s no reason to believe that either trend is going to let up. Both categories of employment are usually paid less than full-timers, so they generate less in payroll and income taxes. Meanwhile, there are still over 1.6 million fewer full-time jobholders than when Obama took office over 40 months ago, a level which is over 7.6 million below the November 2007 peak.
Taking these factors into consideration, hitting the maxed-out threshold by 2018 is not only possible, it’s fairly likely. But if Obama wins reelection, getting there by January 20, 2017, the day he would finally leave office, is a virtual certainty.
Since Obama was inaugurated on January 20, 2009, the ratio has gone from 45% to 71% (through Monday). It continues to grow by about seven points per year. As long as Obama remains, that will continue, and we’ll be on track to max out sometime in 2015. Changing who occupies the White House has never been more important.