CBO, in its most recent Monthly Budget Review, estimated that the FY 2010 budget deficit (the fiscal year that ended at the end of September) was just short of $1.3 trillion, $125 billion less than last year's deficit of $1.4 trillion. At 8.9 percent of GDP, this is the second highest deficit-GDP rate since World War II, with the highest being last year's 10 percent.
In testimony before the Senate Budget Committee last week, CBO Director Douglas Elmendorf quantified the impacts that extending some or all of the 2001 and 2003 tax cuts would have on the economy. CBO looked at both the near-term and in the long-term. The conclusion?
The remarkable level of austerity proposed in Britain’s new emergency budget made news around the world (see our earlier blog for details) as, in the wake of the Grecian debt crisis, the British coalition government declared deficit reduction their number one priority. If enacted, the emergency budget would reduce the nation’s budget deficit from 11 percent of GDP last fiscal year to 1.1 percent by 2015—a very dramatic reduction.
With Congress back in session, the mid-term election right around the corner, and a looming expiration, the debate of the 2001-2003 tax cuts is getting hotter and hotter. Up until now, the debate over the tax cuts, which are set to expire at the end of the year, has mainly centered on whether or not to extend all of them or let them expire for the highest income earners. We believe that this type of debate is missing a key component: each plan’s specific and relative deficit impact.
A small controversy has been brewing in the blogosphere over the relative value of the higher-income 2001/2003 tax cuts and the Social Security shortfall. A couple of weeks ago, the Center on Budget and Policy Priorities displayed this graph, showing the present value of the two being roughly equal:
Today, CRFB released a new policy paper showing a more probable fiscal outlook over the coming decade than what baseline budget projections would predict. Late last week, CBO released its updated current law budget and economic assumptions. While current law projections show debt continuing to grow over the next ten years, it is highly likely that actual deficits and debt will be much worse over both the medium- and long-term.
If lawmakers extended various current policies, as opposed to letting them expire as they are set to under current law, what would happen to economic growth over the coming decade?
Today, CBO released an update to its economic and budget projections for the coming decade, originally reached in February and March. Under its current law baseline, debt projections have increased to $16.1 trillion by 2020, up a trillion dollars from the previously projected $15 trillion amount. Although projections for the next few years remained mostly the same, CBO’s projections for the cumulative deficit over the next ten years have increased by about $300 billion, from $5.9 trillion predicted in March to more than $6.2 trillion now expected today.