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Member Questions of the Week of February 1, 2010

Sulet from Bonners Ferry, ID asks: I serve on our local school board. I was the sole nay vote on the signing of the Race to the Top national education stimulus plan that is being pushed through. How will this ultimately hurt districts and school boards? OUR ANSWER: This is a very complicated issue, but the simple answer is that Race to the Top (RTTT) is a step toward more federal control in education.

For example, the RTTT competition encourages states to sign onto common or national standards that are currently being developed. It also creates an incentive for states to prepare to sign on to common tests or assessments. For a local school board, the decision to participate in RTTT will likely result in more authority shifting to Washington, DC. Read Heritages web memo on the Race to the Top program for more information.

Robert from Harrisburg, PA asks: What was the deficit when President Obama took office? How did it grow to 14 trillion dollars? OUR ANSWER: The budget deficit is the annual difference between what the government takes in, primarily through taxes and fees, and what it spends. And the budget deficit in 2008 was $459 billion.

The national debt is the accumulation or the big picture total of our combined deficits. As Robert mentions, just last week, the Senate voted to expand our total debt limit (again!) by another $1.9 trillion to a grand total of $14.3 trillion. When President Obama took office in 2009, Americas debt total stood at $10.6 trillion. However, one year later that debt figure jumped to $12.3 trillion, with the debt ceiling for 2010 now set at $14.3 trillion. The reason for last years budget deficit is that the government increased spending by $535 billion and took in $419 billion less revenue than expected. This increased the budget deficit from $459 billion to over $1.4 trillion.

Deficits have exploded in recent years because of the recession, the financial bailouts, the $787 billion stimulus bill, and large discretionary hikes by Congress. Even after we get out of the recession, budget projections show permanent trillion dollar deficits thanks in large part to our entitlement programs.

Bruce from Beavercreek, OH asks: It appears to me that the most significant cause of skyrocketing health expenditures is the tax treatment. Why hasn’t this gotten more exposure, say in transferring the tax deduction from employer to individual? OUR ANSWER: The federal tax code currently excludes, without limit, the value of employer-sponsored health insurance from an individual’s taxable income for the purposes of both income and payroll taxes. This tax exclusion is a huge, but hidden, tax subsidy. However, the federal government only offers tax relief to those with employer-based coverage. The discrepancy of the tax treatment of health insurance is a real problem, and any serious health care reform must address this problem. Check out our paper on the issue for more information.

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