The Budget Squeeze Might Be Closer Than People Think 
February 7, 2004

New calculations by Urban Institute economist and tax specialist Eugene Steuerle indicate that a continuation of current tax and spending promises could squeeze the non-security "discretionary" budget down to nothing as early as 2012.

Many conservatives believe that a few cuts or a short-term freeze in non-security discretionary (non-entitlement) spending will put the federal budget back into balance. 

In fact, the current deficit ($477 billion in 2004) is over $100 billion higher than all non-security, non-entitlement outlays combined (roughly $360 billion).  Trimming even $10 or $20 billion from domestic programs would be hard.  Trimming $50 billion would be a miracle.  But it would barely make a dent in the budget deficit.

Meanwhile lots of liberals assume that rescinding some of President Bush's tax cuts will be enough to pay for steady-as-she-goes spending and finance Social Security and Medicare for decades.

Not even close.  Entitlement programs are on a path to grow by 5-8 percent of GDP over the next 30 years.  Bush's tax cuts amount to maybe 2-4 percent of GDP, depending on how the Alternative Minimum Tax (AMT) is fixed.

To help policymakers understand just how bad the budgetary situation is getting, economist Gene Steuerle of the Urban Institute has computed when the budget for non-security social programs would run out of money, presuming the government tried to balance the budget without raising taxes or cutting entitlements or defense spending.

The answer?  Here is the study's main conclusion:

If the budget simply were balanced, and recent tax cuts and spending increases were made permanent, then existing commitments would totally wipe out other domestic outlays by 2012.


Links:
C. Eugene Steuerle The Incredible Shrinking Budget for Working Families and Children Urban Institute (December 3, 2003)
Centrists.Org No-BS Long-Term Budget Baseline
Centrists.Org Deep Cuts in Non-Security Spending and Rapid Economic Growth Won't Balance the Budget (preliminary February 2, 2004)