The Red Line

Time is Running Out for a Debt Ceiling Deal

By Red Jahncke on April 23, 2023

Time is Running Out for a Debt Ceiling Deal

President Biden and Speaker McCarthy are running out of time. That’s what the numbers are telling us in the months since January, when the Treasury said it could employ “extraordinary measures” to remain under the ceiling for five months.

April 22, 2023

The most important “measure” is income tax collections. They look likely to fall significantly short of Washington’s expectations this filing season, dragged down by plunging receipts from capital gains taxes.

Capital gains taxes are likely to come in below the Congressional Budget Office projection of $315 billion for the full fiscal year of 2023. CBO’s forecast is down only $63 billion, or 17%, from last fiscal year’s record high of $378 billion that was produced by the eye-popping rise in stocks of 27 percent in 2021, as measured by the S&P Index .

April 25, 2023

Such a modest decline seems unlikely given that the stock market in 2022 had a dramatic reversal of fortune and plunged almost 20%. That’s a greater annual decline than in any year since 2008, when the S&P plunged 38% and capital gains taxes fell about 50% the next fiscal year, according to CBO.

I’ll Buy Lunch

By Red Jahncke on April 19, 2023

I’ll Buy Lunch

April is tax season, as taxpayers are painfully aware. Every year a large proportion of individual income taxes are paid in April. But, depending upon the economy and stock market, April tax payments vary significantly year to year and their composition even more so.

4/19/23

In April 2019, individuals across the land paid $397 billion in income taxes. Of that, $263 billion were “other” taxes, namely taxes on non-wage income. Three year later, in April 2022, individuals paid $642 billion, of which a whopping $515 billion were other taxes, mostly from stock market gains.

The hundred-billion dollar question in Washington these days is how much will arrive this month.

Following the national pattern, the one-billion dollar question in Hartford is how much will arrive this month.

A Predicted Tax Revenue Plunge Looms in Connecticut

By Red Jahncke on April 5, 2023

A Predicted Tax Revenue Plunge Looms in Connecticut

Connecticut tax revenue is likely to plunge in the last four months of the current fiscal year, taking annual tax revenue down about $1.1 billion below the official forecast, according to a new study by The Townsend Group which I head.

April 5, 2023

That’s a big miss in a state with total annual tax revenue of about $22 billion. It is a huge miss, given that we already know how much taxes have been collected for two-thirds of the year.

The miss relates exclusively to tax revenue derived largely from investment activities.

April 12, 2023

No Country for Young Mothers

By Red Jahncke on March 23, 2023

No Country for Young Mothers

The most consequential change in the role of women is getting scant attention during Women's History Month.

March 22, 2023

A rising percent of women in the developed world do not intend to have children. In a 2021 survey by PEW Research, 44% of childless U.S. adults of childbearing age said they were “not too likely or not at all likely” to have children, up from 37% in 2018. These are alarming numbers. They cry out for follow-up research.

March 23, 2023

Are they a temporary hangover of the pandemic, during which births actually increased among the college-educated according to other research, or an acceleration of ongoing trends, some good but most not so much?

March 26, 2023

So, why don’t childless U.S. adults want to have kids?

Debt, Not the Debt Ceiling, Is the Real Crisis – Two Months On

By Red Jahncke on March 8, 2023

Debt, Not the Debt Ceiling, Is the Real Crisis – Two Months On

Almost two months ago, we reached the ceiling on the national debt. On its natural course, the debt would have blasted through the $31.38 trillion ceiling. So, the Treasury Department began implementing “extraordinary measures” to avoid breaching the limit. Treasury estimated that it could keep the debt under the cap for roughly five months.

March 7, 2023

Congressional Republicans say there must be a plan to cut the massive deficit spending which has fueled the recent rapid escalation of national debt.

March 8, 2023

The so-called responsible faction in the debt ceiling debate says that the ceiling should be raised without any preconditions -- without any risk of default.

March 8, 2023

There’s a group of about 20 House Republicans—who originally opposed Kevin McCarthy’s speakership—who have announced their adamant opposition to raising the ceiling without meaningful spending cuts.

March 10, 2023

In turn, the responsible faction has reared up in indignation and labelled this small faction irresponsible and worse.

But who’s really irresponsible?

March 17, 2023

This small group or the Biden administration and congressional Democrats, who have been borrowing and spending massive amounts for two years.

Let the Numbers Speak.

By Red Jahncke on February 24, 2023

Let the Numbers Speak.

Two weeks ago, the lead editorial in The Wall Street Journal compared New York State and Florida “by the numbers” in an exercise The Journal described as “comparative governance.”

February 24, 2023

The exercise merits emulation. So, let’s add “the numbers” for the Nutmeg State alongside those that the Journal displayed for the Sunshine State and the Empire State. To The Journal’s chosen metrics, I have added just a few, without which the number set would not capture the fiscal reality of Connecticut.

Now let’s compare Connecticut to New York. Forget a comparison with Florida.

Is Connecticut sliding further toward fully socialized medicine and consequent fiscal distress?

By Red Jahncke on February 9, 2023

Is Connecticut sliding further toward fully socialized medicine and consequent fiscal distress?

Last Thursday, Governor Ned Lamont announced a plan under which the state would give $20 million to a non-profit which, in turn, would use the money to buy $2 billion in uncollectible unpaid medical bills from the state’s hospitals, and, then forgive the debt.

February 8, 2023

That would seem a good deal, with such a small cost to forgive so much debt.

Yet, at one cent on the dollar, it is a huge $1.98 billion loss for the state’s hospitals. But they appear to be willing participants, because they haven’t been able to collect this debt and may already have written it off.

The Bernie Sanders of the world will rejoice, because the debtors will wind up having received essentially free health care.

But we should remember the donation-seeking credo of the non-profit Connecticut Mirror newspaper which broke the story: “Free to Read. Not Free to Produce.”

This medical care may wind up being free to these patients, but it was not free for the hospitals to provide. There is no such thing as “free.” Someone always has to pay.

Lamont Should Ignore His Budget Officials

By Red Jahncke on January 25, 2023

Lamont Should Ignore His Budget Officials

The last time the stock market plunged as drastically as it did last year was 2008. Afterward in 2009, federal income tax collections from non-withheld (non-wage) income, mostly investment income from the 2008 stock market, plummeted 31%.

After last year’s stock market plunge, Connecticut budget officials are forecasting only a 15% decline, according to the new Consensus Revenue Forecast.

If past is prologue Connecticut should experience at least a 30% decline. That would put tax revenue $1 billion below the just-released new Forecast, wiping out a large chunk of the newly projected $3.1 billion budget surplus for fiscal 2023.

Yet, no one will know until April, when almost half of all such revenue arrives, following good years in the stock market, bad years and flat years. In the months beforehand, little non-withheld income tax revenue is ever received.

Debt, Not the Debt Limit, Is the Real Fiscal Crisis

By Red Jahncke on January 20, 2023

Debt, Not the Debt Limit, Is the Real Fiscal Crisis

Washington is now consumed by the question of whether to raise the ceiling on the national debt. That ceiling currently stands at $31.38 trillion, barely above the $31.34 trillion of outstanding debt subject to the ceiling, according to the latest Daily Treasury Statement.

January 20, 2023

The so-called responsible faction in the impending debt debate says that the ceiling should be raised without any risk of default. The nation’s creditworthiness, they argue, shouldn’t be held hostage by conditions of fiscal discipline. The White House falls into this faction, insisting on a higher ceiling without any strings attached.

January 21, 2023

A group of about 20 House Republicans—many of whom originally opposed Kevin McCarthy’s speakership—announced their opposition to raising the ceiling without spending cuts. On Bloomberg TV on Wednesday, Representative Andy Ogles of Tennessee said he was “unwilling to give Biden a blank check.” His emerging faction is being called irresponsible and worse.

But who’s really irresponsible? This small group of Republicans who want to reintroduce fiscal discipline or the Biden administration and congressional Democrats, who have been borrowing and spending like drunken sailors for two years. Since President Biden’s inauguration alone, the national debt has soared by over $3.6 trillion.

Was this spending responsible after $4.4 trillion that had already been borrowed and spent between February 2020 and January 2021 as part of a necessary and sufficient response to the pandemic and the ensuing economic shutdown? Many economists warned that Mr. Biden’s first spending initiative, the $1.9 trillion American Rescue Plan, was unnecessary and would unleash inflation—and it clearly has.

It’s hardly irresponsible to suggest that we return to fiscal sanity. Indeed, any increase in the debt ceiling should be matched by an equal reduction in this slew of post-pandemic domestic spending.

Yet the Biden administration’s irresponsibility in its domestic spending isn’t the primary reason it should be reversed.

A Democrat Speaks Pure Republicanism

By Red Jahncke on January 11, 2023

A Democrat Speaks Pure Republicanism

Connecticut Governor Ned Lamont, a Democrat, talked pure Republicanism in his State of the State address last week, eloquently articulating fundamental GOP principles.

Talk is cheap. Will he walk the walk, and will he be able to bring Democrats along on the walk?

During last fall’s election campaign, Lamont took personal credit for turning a $4 billion deficit into a $4 billion surplus. In last week’s address he was humbler, crediting the turnaround to the bipartisan budget reforms of 2017 that were adopted even before he announced his first campaign for the Governor’s Mansion.

Not only did he credit the budget reforms, but he doubled down on them, saying “Connecticut’s permanent fiscal crisis is over. It’s over, as long as we maintain the same fiscal discipline that served us so well over the last four years.” Fiscal discipline is a Republican virtue. It means Connecticut's various caps on spending and on use of revenue are to remain in place.