President’s FY 2008 Budget Totals $2.9 Trillion

The President’s FY 2008 budget proposal, released on Monday, includes a plan intended to produce a $61 billion budget surplus by FY 2012. The surplus would be achieved partly through cuts in domestic spending and a slowing of growth in entitlement spending, particularly healthcare. It would also make permanent the tax cuts that were enacted during the President’s first term.

The budget calls for $929.8 billion in discretionary spending, a 6.5% increase, with most of the increases going toward defense, homeland security, and foreign aid. However, the budget assumes an increase of only 1%—less than the rate of inflation—for all other discretionary spending.

Critics contend that the budget has the wrong priorities and would result in very substantial increases in the federal debt. Further, they say that it assumes adjustments to alternative minimum tax (AMT) provisions only for FY 2008, and is thus unrealistic in its projections for an FY 2012 surplus, since it ignores the effects on revenue of a possible longer-term tax code change to the AMT.

Budget Would Include Deep Cuts in Employment and Training Programs

The Administration’s FY 2008 budget proposal calls for $10.6 billion in discretionary funding for the U.S. Department of Labor, compared to $11.7 billion in its FY 2007 request. Cuts to the overall budget for Employment & Training Administration programs (which includes WIA programs and others) would total more than $1 billion.

Similar to last year’s proposal, the plan calls for the creation of Career Advancement Accounts (CAAs) and the merging of funding streams—i.e., the elimination of funding for Adult Employment and Training Activities, Dislocated Workers Employment and Training Activities, and Youth Activities--into a single CAA funding stream of $3.4B. The Department of Labor’s budget overview says “(s) tates would be limited in the use of funds for administrative costs and be required to use a significant share of the funding to finance Career Advancement Accounts.” The Career Advancement Accounts would be self-directed and would allow workers to access $6,000 for job training over two years.

In addition, the funding request for the Employment Service is reduced from $749.3M in FY 2006 to $15.1M Funding for the Migrant and Seasonal Farmworkers Program would be eliminated. The Ex-Offender Activities Program would be reduced by $39.6M compared to FY 2006. And, the FY 2008 request for the Job Corps would be slightly lower compared to FY 2006.

The proposed budget also requests:

• An increase of $150M (compared to FY 2006) for Community-Based Job Training Grants. • An increase of $120M (compared to FY 2006) for WIA Competitive Grants.

More details on the FY 2008 budget proposal are available at: http://www.whitehouse.gov/omb/bud get/fy2008/budget.html and http://www.dol.gov/_sec/Budget2008/overv iew-toc.htm.

FY 2007 Appropriations

Senate Majority Leader Harry Reid (D-NV) filed a cloture petition on Wednesday to limit debate on the $463.5 billion bill that would finally resolve FY 2007 appropriations for thirteen federal agencies. Republicans want to add amendments, but it is thought that ultimately they will not attempt to filibuster the bill. A vote in the Senate to close debate on the bill is scheduled for this coming Tuesday. The current continuing resolution will expire on Thursday, February 15th.

House Small-Business Tax Bill

House Ways and Means Committee Chairman Charles B. Rangel (D-NY) stated Monday that the Committee will mark up a small-business tax bill and have the bill on the House floor next week. The tax breaks included in the House bill are expected to be more limited (between $1 billion and $1.5 billion) than those included in the Senate- passed version of the minimum wage bill. The House bill is expected to include a one-year extension of the Work Opportunity Tax Credit. It is unclear at this point whether the tax breaks would be attached to the House version of the minimum wage bill.

EntrepreneurshipWeek to be Held February 24th-March 3, 2007

EntrepreneurshipWeek USA will offer thousands of activities including invention competitions, entrepreneurship “film festivals,” networking events, school-based activities, and local entrepreneurship summits. It is designed to help kids see themselves as entrepreneurial thinkers—using creativity and innovation to start their adult lives. For more information, see htt p://www.entrepreneurshipweekusa.com.

GAO Report Examines Effects of Poverty on the Economy

In a recent Government Accountability Office (GAO) report, Poverty in America: Consequences for Individuals and the Economy, GAO examines (1) what the economic research tells us about the relationship between poverty and adverse social conditions, such as poor health outcomes, crime, and labor force attachment, and (2) what links economic research has found between poverty and economic growth. The report notes that “(e)conomic theory has long suggested that human capital—that is, the education, work experience, training, and health of the workforce—is considered one of the fundamental drivers of economic growth. The conditions associated with poverty can work against this human capital development by limiting individuals’ ability to remain healthy and develop skills, in turn decreasing the potential to contribute talents, ideas, and even labor to the economy. An educated labor force, for example, is better at learning, creating and implementing new technologies.” The report (GAO 07-343T) is available at h ttp://www.gao.gov/new.items/d07343t.pdf.