Spending and revenues in the long-term outlook is always an interesting topic to discuss. Just like with debt, you find words and phrases like "unprecedented" or "extraordinarily high" used frequently. In this blog, we'll use those words a number of times while showing spending and revenue levels under the Extended-Baseline Scenario and Alternative Fiscal Scenario (AFS).
With the release of CBO's Long-Term Outlook, we thought it would be useful to break down the assumptions that the Extended-Baseline and the Alternative Fiscal Scenario make. Considering the huge divergence in the debt paths of these two scenarios, it is important to understand what they do.
Update: Our paper on CBO's Long Term Outlook has been released.
CBO has just released its 2011 Long Term Outlook, detailing spending, revenue, and debt levels over the next 75 years. The report shows a similar trend in both the Extended Baseline and Alternative Fiscal Scenarios: worsening in the short term, improvement in the long term compared to last year.
Yesterday at the Peterson Foundation's 2011 Fiscal Summit, six think tanks--Heritage, AEI, EPI, Center for American Progress, Bipartisan Policy Center, and the Roosevelt Institute--released their plans to cut our medium- and long-term deficits and debt. We won't get into the details of each plan (you can check them out here), but we will quickly compare the metrics for each of them.
With the release of the 2011 OASDI Trustees Report, there are a lot of numbers to digest, not to mention a few hundred pages to read (if you actually want to go through the whole thing). Fortunately, for our readers, CRFB has released its analysis of the report, which breaks down the important points.
Last week, CBO showed that the President's Budget was way too optimistic about its projections of deficits and debt. But CBO's findings would not have surprised readers of The Bottom Line, who saw us try to predict what the budget would look like using the parameters of CBO's January baseline and getting rid of the unspecified offsets for increased transportation spending and the doc fix.
Along with CBO's preliminary analysis of the President's Budget on Friday came an update in CBO's baseline, which actually shows a $234 billion reduction in deficits over the 2012-2021 period compared to its January baseline. It also shows an $81 billion reduction in the deficit this year, meaning that they project the 2011 deficit to not be an all-time high.
CBO has just released their preliminary analysis of the President's Budget. Be sure to check back to CRFB and The Bottom Line soon for more analysis and commentary.
Interest rates have an enormous effect on how much we pay each year on servicing our debt. In the Budget and Economic Outlook from January, CBO estimated that 1 percent higher interest rates each year could increase deficits by $1.3 trillion over ten years. CBO also estimated a few other "rules of thumb" to show how changes in inflation and economic growth have significant impacts on budget forecasts.