A recent Washington Post article, “As Red Ink Recedes, Pressure Fades for a Budget Deal,” suggests that a fall in the short term deficits may diminish the motivation for a budget deal. But this misses the main concern of our fiscal outlook. While the short-term outlook has improved somewhat, long-term debt projections are still unsustainable.
Continuing our analysis of the President's FY 2014 budget proposal, we turn to how the President's budget would affect long-term revenues and spending. As we said last Monday after looking at the GAO's long-term projections of debt and deficits, our debt problem looks much more daunting when projecting beyond the standard ten-year window. With that in mind, it is useful to look at OMB's 75-year projections of the President's Budget.
Erskine Bowles and Alan Simpson's new plan, "A Bipartisan Path Forward to Securing America's Future," saves $2.5 trillion to $2.85 trillion over the next decade, exceeding the $2.4 trillion we identified as the minimum savings needed to put the debt on a clear downward path relative to the economy.
Last week, the Government Accountability Office (GAO) released its long-term fiscal outlook, presenting both long-term projections and estimates of the fiscal gap. Since the last longer-term projections from CBO came out in June, the report provides a good measure of what the budget looks like after the American Taxpayer Relief Act and the challenge we face going forward.
CBO's latest Monthly Budget Review (MBR) for March means that we now have budget data for the first six months of FY 2013. The six-month deficit stands at $601 billion, down from $779 billion over the same period last year. For context, CBO previously projected that the deficit for FY 2013 would be $845 billion, compared to the actual FY 2012 deficit of $1.089 trillion.
The Economic Policy Institute's Ethan Pollack has a blog post questioning the accuracy and ultimate usefulness of long-term (75-year) budget projection, especially CBO's Alternative Fiscal Scenario (AFS).
The Congressional Budget Office has been busy on its blog lately, posting both snapshots of federal programs and also publishing responses to questions they have received from Members of Congress at hearings. Their latest post from director Doug Elmendorf is the latter variety, showing the sensitivity of budget projections to changes in interest rates.
With the new expectation that the House budget resolution will reach balance in 10 years -- more than 15 years earlier than was projected last year -- there has been much speculation about how House Budget Committee chairman Paul Ryan (R-WI) will modify last year's budget to reach the more aggressive target.