|
 |
 |
 |
 |
 |
 |
 |
 |
|
A Preliminary Assessment of CBO's New Budget Projections
Note--revised 8/28/2003 to correct a $5 billion overstatement of revenues in 2011 as a result of a transcription error gathering unpublished data on a revenue interaction effect from the Congressional Budget Office, and on 8/29/2003 to correct a 0.3% of GDP understatement of income tax revenues between 2014 and 2030 as a result of an error linking the pre-2014 CBO baseline with the long-term model. The corrected figures for 2011 are shown in Figures 1 and 2, and the Tables. These corrections do not significantly affect the projections or alter the discussion below. Under realistic assumptions, the deficit will be $500 billion in 2004 and will total $6.1 trillion between 2004 and 2013. The public debt will rise from $4 trillion this year to $10 trillion a decade from now. (And after that, things really get bad.) Centrists.Org, No-BS Budget Baseline Tables: Table 1. Federal Budget in Billions of Dollars, 2000-2030 Table 2. Federal Budget as a Percent of GDP, 2000-2030 Table 3. Summary Table, 2000-2030 in 10-Year Intervals
#3. The interaction between items #1 and #2 is included Figure 1. Adjustments to CBO's Statutory Baseline, in Billions of Dollars (Estimates Include the Cost of Additional Debt Service)
Source: Centrists.Org Notes: All estimated adjustments based on Table 1-6 of Congressional Budget Office The Economic and Budget Outlook, An Update (August 2003). Interaction effect based on footnote c, with year-by-year detail provided by CBO staff. Therefore, with the adjustments, the deficit grows to $6.1 trillion over 10 years, roughly $4.7 trillion higher than CBO's statutory baseline deficit of $1.4 trillion (see Figure 2). The annual deficit would hover around 4 percent of GDP through 2010, before rising toward 5 percent of GDP by 2013, the last year of CBO's projections. The public debt would grow from $4 trillion in 2003 (37 percent of GDP) to $10 trillion (57 percent of GDP) by 2013. Figure 2. Budget Deficit (-) or Surplus (+), With Adjustments (In Billions of Dollars)
Source: Centrists.Org Notes: All estimated adjustments based on Table 1-6 of Congressional Budget Office The Economic and Budget Outlook, An Update (August 2003). Interaction effect based on footnote c, with year-by-year detail provided by CBO staff. Because CBO now provides adjustments to the statutory baseline that allow analysts to include a more politically realistic revenue and spending trajectory, Centrists.Org simply used the (adjusted) CBO estimates in its baseline through 2013. Specifically, the Centrists.Org baseline now equals the CBO baseline, plus CBO's estimate of the revenue and debt service costs of extending expiring tax cuts, CBO's estimate of holding the growth of discretionary (non-entitlement) spending at the same rate of growth as nominal GDP, and the cost of the Medicare drug benefit as included in the Congressional Budget Resolution. The estimates also include an extension of the fixes to the Alternative Minimum Tax (AMT) and the interaction between that extension and the extension of the rest of the expiring tax cuts, using unpublished year-by-year data obtained from CBO. After 2013, the CBO numbers are carried forward to 2030 using standard economic and demographic assumptions. On this trajectory, the budget essentially disintegrates after 2015, with deficits rising from 6 percent of GDP in 2015 to 12 percent by 2025. The public debt grows from just over 60 percent of GDP in 2015 to well over 100 percent of GDP by 2025. Of course, it is possible that Congress will not enact a new Medicare benefit (or will accompany new benefits with long-term cost containment measures), will let tax cuts lapse, will dramatically slow the growth of discretionary spending, or will take other actions designed to reduce the projected deficits. Nevertheless, Centrists.Org projects that such deficit reduction measures are not likely based on current legislative outlook. As always, long-term projections are not intended to be forecasts of what is likely to occur. Instead they are intended to be realistic, plausible projections of the trajectory that current spending and revenue patterns imply for the budget. Congress will almost certainly be forced to change that trajectory by slowing the growth of spending and raising tax revenues, especially after 2010, when the large benefit boom generation retires and joins the entitlement rolls, and would otherwise place the budget under an untenable stain. Centrists.Org, No-BS Budget Baseline Tables: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
Centrists.Org is a non-partisan, non-profit, organization formed under section 501(c)(3) of the tax code, and dedicated to public education on vital public policy matters. Contributions to Centrists.Org are tax deductible. Centrists.Org |
