When does a cut to the federal budget actually result in an increase in the deficit? When, as the New York Times profiled today, it cuts the Internal Revenue Service, leaving the IRS understaffed and unable to collect all the taxes owed to the federal government:

An expanding workload and cuts in funds have left the Internal Revenue Service unable to adequately perform either of its primary duties — collecting taxes and providing the public with reasonable service, according to a report released Wednesday by the I.R.S.’s internal monitor.

The agency’s staff reductions and backlog have limited its ability to collect the hundreds of billions of dollars a year that the government is owed but not paid, Nina E. Olson, the national taxpayer advocate, said in her annual report to Congress.

In the report, Olson noted that, due to budget cuts, the IRS “is unable to maximize revenue collection, contributing to the federal budget deficit.” “It will never be possible to eliminate the tax gap entirely, of course, but even modest improvements would help to reduce the federal budget deficit. Moreover, even apart from the fiscal implications, the size of the tax gap raises important equity concerns,” the report added.

The latest data shows that there is a $385 billion gap between the taxes owed to the U.S. and those collected, meaning close to 15 percent of federal taxes went unpaid. There would have to be a $3,400 “noncompliance surtax” paid by every tax compliant household, in order “to enable the federal government to raise the same revenue it would have collected if all taxpayers had reported their income and paid their taxes in full.” The IRS, meanwhile, estimates that every dollar spent on enforcement brings in $4-$5 dollars of additional revenue.

During the final Iowa debate, GOP candidates came out hard against former House Speaker Newt Gingrich and his ties to government backed mortgage behemoth Freddie Mac. But there was one man whose voice rang out particularly discordant amid his attempt to take a swipe at Gingrich’s moral character. Former Pennsylvania Sen. Rick Santorum (R) has recently rebranded himself as an outspoken critic of both Fannie Mae and Freddie Mac, despite his previous support for the GSE’s affordable housing programs.

Intentionally overlooking his 1998 vote in favor of a motion to increase the Federal Housing Administration’s loan maximum from $170,000 to $197,000 — a maneuver that is strongly at odds with the hardline Republican stance he’s adopted in recent months — Santorum, in a May 2010 op-ed penned for the Philadelphia Inquirer, asserted that Fannie and Freddie were to blame for the financial crisis as they sought “to accomplish Democrats’ affordable-housing goals“:

Congress created Fannie and Freddie in 1938 to provide the affordable housing that Democrats thought the market was incapable of providing. In the 1990s, the Clinton administration pushed the mortgage giants to take on more subprime debt — and therefore risk — to accomplish Democrats’ affordable-housing goals.

As Fannie and Freddie grew in size and risk profile, I and some of my Republican colleagues attempted to restrict their growth and reform them. Democrats opposed us, and they prevailed until it was too late. In 2008, Fannie, Freddie, and the real estate bubble burst.

This particular brand of rhetoric isn’t unusual during the GOP primaries, where candidates have generally “embraced a theory that blames government policies aimed at expanding access to homeowner[s]hip for the 2008 financial crisis.” Neither is this widely accepted claim foreign to Santorum, though in suggesting that he agrees with the misguided theory that federal policies aimed at expanding access to affordable housing amongst low-income families were a preeminent factor in the 2008 financial meltdown, Santorum is, in effect, refusing to acknowledge the role he had in the matter.

In fact, in 2005 Santorum told his fellow Republicans that he was “very concerned about making sure that we do things in working with this legislation [on Fannie and Freddie] to improve the access to affordable housing,” adding that he wanted to orient Fannie and Freddie “toward taking a more active role in creating housing opportunities for low and moderate income families.”

In 2000, Santorum authored an academic article titled “A Compassionate Conservative Agenda: Addressing Poverty for the Next Millennium,” which stated that “access to safe and affordable housing is … a significant concern for low-income Americans seeking to pull themselves out of poverty,” he wrote. Now though, he’s more than happy to blame those same policies for causing the financial meltdown.

– Fatima Najiy

Before Sen. John McCain (R-AZ) was trying to help Mitt Romney win the White House, the senator spoke out against Romney’s former company, Bain Capital, for engaging in the type of behavior that is now drawing the ire of the other GOP presidential hopefuls. McCain has endorsed Romney this year, and is defending him against attacks on Bain’s “vulture capitalism” from Newt Gingrich and Rick Perry. But as BuzzFeed points out, even McCain saw the problems with Bain four years ago when he ran against Romney.

In Florida, McCain shot at Romney: “As head of his investment company he presided over the acquisition of companies that laid off thousands of workers.” In a debate, McCain charged, “He managed companies and he bought and he sold and sometimes people lost their jobs.” McCain’s campaign manager added, “He learned politics and economics from being a venture capitalist, where you go and buy companies, you strip away the jobs, and you resell them,”

But today, McCain suggested attacks on Romney’s jobs record at Bain are akin to “communism.”

Meanwhile, former GOP presidential candidate Mike Huckabee is also defending Romney on Bain, even though he once quipped that Romney looks “looks like the guy who fired you.”

As we’ve been noting, Mitt Romney’s economic plan calls for a massive tax cut for the rich, even while the plan would likely result in a tax increase on millions of middle class families. And as it turns out, Romney’s tax cuts for the rich would dwarf even those put in place by George W. Bush in 2001 and 2003, as Center for American Progress Director of Tax and Budget Policy Michael Linden noted:

Republican presidential candidate Romney’s plan for federal taxation begins with a hefty portion of Bush-era tax policy: Permanently extend all the tax cuts passed in 2001 and 2003, including those that mainly benefit the extremely wealthy. Then Romney layers on a heaping batch of new tax cuts for the rich, including a full repeal of the estate tax—which is currently paid by only the richest 0.14 percent of estates—and a massive corporate tax cut.

The result is a tax code that asks even less of the rich than George W. Bush’s did.

Romney’s plan also gives nearly 60 percent of its benefit to the richest 1 percent of Americans, while preserving the loopholes that let the wealthy pay less than middle class families.

Romney’s constantly claims that he’s “not worried about rich people,” and that his tax plan is “focused” on the middle class. In fact, he’s absurdly claimed that he’s not proposing any tax cuts for the wealthy at all. But as it turns out, he would lavish even more tax breaks onto the rich than did George Bush, even after Bush’s tax cuts were a significant factor leading to today’s large budget deficits.

Last night, Sen. Jim DeMint (R-SC) joined Jon Stewart on the Daily Show to tout his latest book, “Now or Never: Saving America From Economic Collapse.” Noting DeMint’s penchant to blindly hack at the federal budget, Stewart said Republicans offer “no differentiation between money that is squandered and invested.”

Stewart pointed to Head Start, a program that promotes the school readiness of low-income children, as an example of an effective federal program that the GOP repeatedly threatens to cut. DeMint agreed that “preschool is important,” but that the fundamental problem with these programs is that they “don’t cure poverty,” but rather “subsidize it” by making low-income Americans “dependent on the government”:

DEMINT: The problem we have is from the federal level, it’s very hard to do things well. I mean, you don’t find too many federal programs that are working…When we politically manage the programs, the money is not distributed well and there’s no evidence — I mean we spent trillions trying to help poverty in America. But we don’t cure poverty, we subsidize it when we make people dependent on the government and make it harder for them to get up the ladder.

Watch it:

DeMint’s argument is entirely false. Today, 46.2 million Americans live in poverty and shell out a significant degree of their income to pay for basic needs like electricity, housing, and food. In 2008, 50.3 percent of poor households with children reported that they were unsure whether they could provide a meal each day. But census data revealed that safety net programs were instrumental in keeping vulnerable Americans afloat. The school lunch program saved 1.1 million Americans from poverty. Housing subsidies saved 2.6 million, and food stamps kept 5.1 million Americans above the poverty line. By ensuring that struggling families can afford basic needs, these programs protect and bolster the economic security needed to help Americans “get up the ladder.”

DeMint seems to prefer the negative stereotypes that paint vulnerable Americans as “dependent” and unwilling to work. Perhaps that’s why 70 percent of the cuts in his zealous deficit reduction plan target these safety net programs and place a “disproportionate burden on low-income groups.” Of course, as Stewart pointed out, simply allowing the Bush tax cuts to expire would virtually erase the deficit while sparing these vital programs. But for DeMint, that’s simply out of the question.

Yesterday, 2012 GOP presidential frontrunner Mitt Romney dismissed those concerned with the nation’s growing income inequality (which may be worse than the inequality in Ancient Rome) by saying such concerns are “about envy.” “I think it’s fine to talk about those things in quiet rooms and discussions about tax policy and the like. But the president has made it part of his campaign rally,” Romney said. “It’s a very envy-oriented, attack-oriented approach and I think it will fail.”

However, there are real negative consequences to income inequality. Studies have shown that inequality can severely restrict economic growth. Today, ThinkProgress asked Alan Krueger, chairman of President Obama’s Council of Economic Advisers, to respond to Romney’s assertions. Krueger replied by noting that addressing income inequality is “not about envy at all,” but about ensuring that all segments of the population share in economic growth:

The trends that have taken place in the U.S. over the last three decades are particularly of concern to economists and others. We’ve seen a steady decline, erosion, in the size of the middle class. That’s not good for the economy. That’s not good for all segments of American society. And I think some of [the government's] policies have exacerbated that…There are certainly legitimate policy issues, and as the President’s economic adviser, it’s certainly something that we’re focused on. I don’t think this is an issue about envy at all. I think we’d like to see all segments of society do well. The President has said ‘when all Americans do well, America does well.’ The accumulating evidence suggests that the erosion of the middle class has been bad for the economy.

Watch it:

According to Krueger, the shift in income inequality over the last three decades is the equivalent of moving $1.1 trillion of income from the 99 percent to the top 1 percent every single year. This has led to a severe shrinking of the middle class:

Romney though, would prefer that these facts stay in “quiet rooms,” rather than be discussed by lawmakers and the public.

Former Massachusetts Gov. Mitt Romney’s (R) economic plan has become the centerpiece of his presidential campaign. Though his proposals are often vague, analyses of the plan shows that it would provide huge tax breaks for the wealthiest Americans while raising taxes on low-income families. And though Romney claims to be concerned about the federal budget deficit, his plan would add more than $6 trillion in deficits over 10 years.

Romney, who touts his experience as a job creator, has suggested laying off thousands of public sector workers. He wants to slash vital programs for the poor and middle-classes, repeal the Affordable Care Act, and gut Medicare and Social Security. His embrace of the radical Cut, Cap, and Balance plan pushed by House Republicans would, in effect, shrink the federal government to pre-Ronald Reagan era sizes.

But for all his talk about the plan on the campaign trail, economists surveyed by Reuters say Romney’s plan likely wouldn’t deal with the main drags on the American economy, while the cuts to vital programs would be “utterly draconian“:

These steps would shrink the federal government’s role more than even former president Ronald Reagan managed 30 years ago when he turned many social programs over to the states. That scenario concerns liberal economists.

“If applied, these fiscal measures would be utterly draconian. The attacks on Medicare and Social Security would throw large portions of the population into poverty,” said Jamie Galbraith, business professor at the University of Texas in Austin.

Mainstream economists worry more that neither Romney nor his Republican opponents are addressing the main drag on the U.S. economy – weak demand from American consumers still weighed down by debt.

Among the “main drags” highlighted in the Reuters piece is the housing crisis, which has placed “a big drag on consumer spending which drives two thirds of the U.S. economy.” But the GOP candidates have offered little in the way of solutions for the crisis, and Romney’s own prescription involves letting the housing market hit rock bottom — further damaging millions of homeowners. “Markets work,” Romney told moderators at a debate in November when asked what he would do to address the housing crisis.

According to former Wall Street economist Thomas Gallagher, addressing demand should be at the top of the list when it comes to speeding the recovery. Instead, Romney is focused on budget deficits and tax reform — the types of austerity measures that are pushing Europe toward another recession. Perhaps that’s why a survey of economics professors found that the Republican proposals were so bad, they wouldn’t pass an Econ 101 class.

According to the latest data from Realty Trac, foreclosures in 2011 hit their lowest point in four years. One in every 69 homes received at least one foreclosure filing in 2011, while 804,000 homes were repossessed, down from 2010′s record of more than one million repossessions.

While this is good news for the economy, as continued foreclosures have been a drag on the recovery, the numbers are not quite as rosy as they appear. Due to the foreclosure fraud scandal that erupted in 2011 — in which the nation’s largest banks were caught cutting corners on the foreclosure process and submitting fraudulent documents to courts — a host of foreclosures were slowed as the banks examined their foreclosure processes. But now that the banks’ foreclosure pipelines are up and running again, 2012 could be a dark year on the housing front:

While the declines seem like good news for the housing market, where a flood of foreclosed homes has depressed home prices, much of it is due to processing delays caused by fall-out from the “robo-signing” scandal that broke in late 2010.

During the year, banks spent more time making sure paperwork was legal and proper, creating a backlog in the foreclosure pipeline. As a result, the average time it took to process a foreclosure climbed to 348 days during the fourth quarter, up from 305 days a year earlier.

“Foreclosures were in full delay mode in 2011, resulting in a dramatic drop in foreclosure activity for the year,” said Brandon Moore, chief executive officer of RealtyTrac.

However, Moore said there were “strong signs” during the second half of the year that lenders are working through foreclosure backlogs in certain markets. He expects foreclosure activity to rise above 2011′s level but remain below the peak hit in 2010.

An early sign of a possible foreclosure wave is that foreclosure filings jumped 21 percent in the third quarter of 2011. As we’ve noted, “some economists fear the continued slump in housing could short-circuit the recovery in jobs by making it harder for Americans to relocate to find work.”

Last week, the Federal Reserve released a series of proposals for jumpstarting the recovery in housing, including streamlining the mortgage modification process and even forgiving some loan principal for borrowers who have made a good faith effort to stay current on their underwater mortgages. Those proposals have been met with derision by Senate Republicans, with Sen. Bob Corker (R-TN) calling them “completely egregious.”