ASBA Update From Washington

As an ASBA member, you now have free access to news and updates on important issues from our legislative team in Washington DC.

August 2007
by James C. Musser, ASBA Washington Representative

Congress is in its annual Summer District Work Period for the month of August so our wallets and health care are safe for now but seniors beware the SCHIP. There is good news on the deficit and the economy continues to grow. These issues make up this month's Washington round-up.

Health Care: The Democratic Congress gutted the Medicare Advantage program of $50 billion over the next five years to help fund a new entitlement program ostensibly for poor children but, which, in fact, covers young people up to age twenty-five in families that earn as much as $82,000 per year. It also extends coverage to illegal aliens. The program known as SCHIP, short for “State Children's Health Insurance Program”, was originally designed to provide health insurance for children in poor families that lacked any health insurance. The law required the program to be re-examined every ten years to make sure that it was being run well and serving the intended beneficiaries. This year Congress decided to make the program a permanent entitlement. That decision, according to the non-partisan Congressional Budget Office, means nearly three million seniors in the Medicare Advantage Program, which allows seniors to choose among several different health insurance programs, will be forced out of the program or face reduced benefits and higher out-of-pocket costs.

The bill also raises taxes on cigarettes and places a tax on private insurance policies. The bill passed the House narrowly but by a wider margin in the Senate. President Bush may veto the bill to force changes to preserve Medicare Advantage.

Budget: There is continuing good news on the U.S. Budget deficit. It has declined a further $39 billion from February estimates according to the Office of Management and Budget (OMB). Figures also show that the budget is on track to being balanced by 2012 without a tax increase. However, there is a battle over spending set to occur when Congress returns to town in September and further progress toward a balanced budget could be jeopardized by the congressional appetite for new spending.

According to the OMB, if spending remains at the projected levels of increase, the budget could be running a surplus of $33 billion by 2012 without increasing taxes. However, Congress has proposed a $22 billion spending increase this year and even more spending by Congress is projected over the next five years.

Revenues to the U.S. Treasury grew a whopping 11.8% in 2006 and are on track to grow by nearly 7% or an additional $167 billion this year. This surge in revenue growth, largely attributed to the economic activity generated by earlier tax cuts, has resulted in an additional $34 billion in revenue above what the government had projected. The deficit remains below 2% as a share of the economy.

Economy: Despite recent upheavals in the mortgage industry and jitters on Wall Street, economic growth in the most recent quarter is the best in a year. The Commerce Department says that the economy grew at a 3.4% annual pace in the second quarter based largely on increased business spending. This rate of growth marks a substantial improvement over the first quarter of the year when the economy grew by only 0.6%.

While the housing market continued as a drag on the economy, it was less than had been expected by most economists. The Commerce Department also reports that inflation outside of food and energy has moderated. Unemployment remains near historic lows at 4.6% and consumer confidence, a major indicator of economic activity, grew by 7.3 points in July.

Perhaps even more encouraging, the Conference Board's index of leading economic indicators edged up in July indicating that economic activity should grow in the next three to six months.

ASBA closely monitors all the issues affecting seniors and small business owners. Check back each month for the latest from our nation's capital.

James C. Musser, Esq. is a legislative consultant based in Falls Church, Virginia. His reports are updated monthly.