Deficit Reduction Helps the Economy, But It Isn't Just a Counting Exercise

CBO recently released its analysis of a hypothetical deficit reduction plan's effect on the economy. They use a $2.4 trillion deficit reduction plan (about the same as the hypothetical Biden group plan) to illustrate the short-term and long-term economic effects of fiscal consolidation, while showing how these effects either add to or detract from the original deficit reduction.

Projecting Defense Spending

In a recent report, CBO estimated the base defense budget from 2012 out through 2030 using the Defense Department's Future Years Defense Program (FYDP) -- DoD's five-year plan for defense spending submitted to Congress in April 2011 -- to project future spending.

Understanding the Long Term Budget Projections

As if we didn't have enough on CBO's Long Term Outlook last week, we have more long-term budget projections, this time in the form of CRFB's Realistic Baseline!

CBO Makes the Case for Strict Pay-As-You-Go (PAYGO) Rules

In their recent Long Term Outlook, CBO shows the nation to be on an unsustainable fiscal path if we continue our current policies. Under its Alternative Fiscal Scenario, debt reaches 100 percent of GDP by the end of the decade and 200 percent by 2037.

The Economic Effects of High Debt

Continuing our analysis of CBO's Long-Term Outlook, we looked yesterday at the policy assumptions under CBO's two budget paths and at spending and revenue projections in their analysis. Today, we will look at what CBO believes will happen to the economy as a result of our growing debt burden.

Spending and Revenue in the Long Term Outlook

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).

Health Care Versus Aging

As we explained in our recent analysis of CBO's Long-Term Budget Outlook, the debt is on an unsustainable path. Only a decade from now, under their Alternative Fiscal Scenario, debt will surpass 100 percent of GDP. And by 2037, it will exceed 200 percent.

Driving this is the increasing cost of entitlement spending -- Social Security, Medicare, Medicaid and (to a lesser extent) other health spending. But what drives the growth of these programs?

CBO's Elmendorf to Testify Before House Budget Committee at 10am Today

At 10am today, CBO director Doug Elmendorf will testify before the House Budget Committee on CBO's latest Long-Term Budget Outlook, released yesterday.

The Differences Between the Two Baselines

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.

The CBO Long Term Outlook Is Here

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.

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