The CBO’s long-term projections offer an interesting look at future revenues and spending that show the stark implications of fiscal irresponsibility. With a comparison of spending and revenue under the Extended Alternative Fiscal Scenario (AFS) and the Extended Baseline Scenario (EBS), the future consequences of avoiding tough decisions in the present become clear.
Based on CBO's Long Term Outlook, one could conclude solely based on the debt levels projected that either we were headed on a sustainable path, with debt actually being paid off around 2070 (the Extended Baseline scenario), or we were headed for absolute disaster, with debt rising exponentially to 935 percent of GDP 75 years from now (the Alternative Fiscal Scenario).
The much-anticipated CBO Long-Term Budget Outlook has been released this morning, projecting what the budget will look like over the next 75 years. CBO's outlook shows a tale of two paths: the relatively optimistic Extended Baseline and the absolutely disastrous Alternative Fiscal Scenario. The Extended Baseline assumes that current law happens and brings debt down to a sustainable level while the AFS assumes--more realistically--that current policies will be extended, resulting in exponentially growing debt.
Update: The text has been updated to include spending growth numbers for President Bush excluding financial rescue programs.
The USA Today has an interesting article on the "real federal deficit" for 2011. They say that the $1.3 trillion is dwarfed by a more comprehensive tally that includes changes in unfunded liabilities:
Yesterday, Medicare trustee Charles Blahous and former chief economist for Vice President Biden Jared Bernstein had a debate about the fiscal consequences of the Affordable Care Act (ACA). The event, hosted by e21 at the National Press Club, discussed Blahous's recent paper on the ACA that claimed the law would increase the deficit, contrary to CBO projections.
In honor of Tax Day on Tuesday, we will be doing blogs this week about the current shape of the tax code and what can be done to fix it. Our first blog will be about all the tax provisions that will expire at the end of the year, what has been labelled as "taxmageddon" (or the tax side of the fiscal cliff).
CBO's latest Monthly Budget Review for March gives us a look at how the federal budget looks compared to last year halfway through the fiscal year. This year's deficit through six months is $777 billion, compared to $829 billion through the same period last year. The smaller deficit is the result of revenue being $46 billion higher and outlays actually being $7 billion lower compared to FY 2011.
The Government Accountability Office (GAO) has released its Long Term Outlook for the federal budget, showing an ever-climbing debt path as a percentage of GDP over the long term. Under both its Baseline Extended and Alternative scenarios, debt rises rapidly as increasing health care spending, among other things, overtakes revenue. This is especially true of the Alternative, which assumes that expiring tax policies are extended and that revenue and discretionary spending are held to their historic averages over the long term.