CRFB's Updated Realistic Baseline

With the Budget Control Act now in the books, it's time for us to update our CRFB Realistic Baseline from our projections a month ago. In addition to the discretionary spending caps contained in the legislation, we will also incorporate the effects of the final CR (which were excluded from CBO's Long Term Outlook and, thus, our original baseline).

To refresh your memory, our baseline contains a number of adjustments to current law that are very likely to occur. We assume that all of the 2001/2003 tax cuts are extended, the AMT is patched continuously, Medicare physician payments are frozen instead of cut by 30 percent (the "doc fix"), and the wars are gradually drawn down. Compared to a "current law" baseline, these policies (and the subsequent interest costs or savings) add an extra $3.6 trillion to the deficit over the next decade.

Based on this information, back in March, we concluded the deficits could total $10.3 trillion over the next decade, instead of $6.7 trillion.

The passage of the Budget Control Act, though, reduces that number somewhat. Compared to March, the new discretionary caps and spending cuts enacted in April should reduce deficits by $1.1 trillion over the next decade.

Bridge from Current Law to CRFB Realistic Baseline
  2012-2021 (Billions)
CBO March Baseline Deficits $6,738
Tax Cuts Extended and AMT Patched $3,820
Doc Fix Passed $298
War Drawdown -$1,134
Net Interest $620
March CRFB Realistic Deficits $10,342
April CR Cuts -$122
BCA Savings -$756
Net Interest -$183
Post-BCA CRFB Realistic Deficits $9,281


As a result of these changes, total deficits under our Realistic Baseline would be $9.3 trillion through 2021, compared to $10.3 trillion under our previous estimate. And debt as a percent of GDP would be 86 percent in 2021 as opposed to 90 percent.

New CRFB Realistic Baseline Deficits and Debt
  2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Deficits (% GDP) 6.7% 5.0% 4.2% 4.3% 4.6% 4.3% 4.3% 4.6% 4.8% 4.8%
Debt (% GDP) 73.2% 75.8% 76.8% 77.6% 78.9% 80.2% 81.4% 83.0% 84.7% 86.3%

 

Budget Control Act also includes a "Super Committee" to recommend $1.5 trillion in deficit reduction, with a $1.2 trillion trigger scheduled to cut spending automatically if the Super Committee or balanced budget amendment do not succeed. We do not include the success of the Committee or the activation of the trigger in our Realistic Baseline. Including the savings from the automatic trigger would bring the debt down to 80 percent of GDP in 2021. If, on top of that, the upper income tax cuts were allow to expire in 2013, this would result in roughly $800 billion of further defict reduction compared to our Realistic Baseline, bringing the debt down to 77 percent by 2021.

Even if the Super Committee succeeds or the automatic spending cuts take place and the upper-income tax cuts are either not extended or paid for, debt will still remain far above historical norms and will not be on a declining path. Clearly, we need to do more.

Yes, the boomers need to die. It's time to give back.

I am 35 and filing bankrupcy with great stigma in my family and very little financial help.  I am on food stamps and everything else as my parents sit on wealth of over 1m.  Their net worth (combined- they are divorced) is over 6m.

They estranged me because they think I can get a job and my divorce was irresponsible.

THat's fine, but as long as they nurse the chonic ailments they suffer from a lifetime of sedentary lifestyles and overindulgence (watching cable-driving in suburbia and eating high fats) mine and my children's lives will be (and are) very stressful.  In my previous life I was able to save over 100,00.00 and worked in 12 emerging markets on economic reports.  However, my financial state at the moment reversed all their "pride" (the me generation really only cares about themselves so far). The best thing they can do now is take the "me" out of the picture, read Erikson, embrace the end of life- and leave a legacy.  Grow up is the message- all ask for is awareness of the economy and a sense of responsibilty to VOTE! for us- not for you- not for health insurance and lifestyle.  We are paying for the byproduct of trickle down consumer spending, and the power in numbers is and will be in the hands of the boomers for the next 19 years.  Above all- share the message that your grandchildren will suffer gravely.  Your children's role is to create social change- but the only way is to convince the boomers to use their power for the benefit of the rest of us.

 

 

RE Yes, the boomers need to die. It's time to give back.

Ouch!  But I agree. Unless the boomers relent on senior subsidy reform, young versus old will be a better characterization than left versus righ.

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