Although budget projections had already been showing this, we now have more definitive numbers from the Treasury Department that this year's deficit will be smaller than last year's. At this time last year, the deficit through the first eight months equaled $927.4 billion compared to $844.5 billion this year.
In our recent analysis of CBO's Long-Term Budget Outlook, we elaborated on how the overall federal debt is on an unsustainable path. Just twelve years from now, under CBO’s Alternative Fiscal Scenario (AFS), debt will surpass 100 percent of GDP, and by 2038, it will exceed 200 percent. Driving this debt growth are the increasing costs of Social Security and especially Medicare and Medicaid.
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.