CBO's Monthly Budget Review for July lays out how the first ten months of this fiscal year compared to last year. The FY 2012 deficit so far totals $975 billion, $125 billion lower than the $1.1 trillion at this point last year. The lower deficit is the result of revenue being $114 billion higher and spending actually being $11 billion lower.
Today, CBO has released yearly estimates of the long-term budget projections for the Department of Defense. The DoD provides a plan to Congress called the Future Years Defense Program (FYDP), in which DoD lays out its plans and the needed appropriations for the next five years. CBO uses this report to project future defense spending through 2030, using their own assumptions for variables like health care costs and weapons system prices that affect the defense budget.
CBO's latest report details the full effects on the federal budget of raising the federal excise tax on cigarettes. As they would when analyzing any tax policy, CBO estimates the revenue effect of this tax increase by looking both at how an increase in taxes would increase revenue, and how the subsequent reduction in cigarette purchases would reduce revenue.
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.
CBO's Long Term Outlook includes a number of variables on how the budget would look over the next 75 years. But they also show how the economy would fare under the two baseline scenarios: the Extended Baseline and the Alternative Fiscal Scenario. The Extended Baseline assumes that various temporary spending and tax policies expire and the sequester takes effect, while the AFS assumes the opposite.
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).
Critics of CBO scoring like to cite past predictions that widely missed the mark. Sometimes, too, critics compare apples to oranges, and that is the case with the 2010 Affordable Care Act (ACA) again this week. As reported by National Journal, Congressman Phil Roe (R-TN) claims in referring to CBO's report on the fiscal cliff, "Remember that the CBO estimated two years ago that the Affordable Care Act would be $900 billion, and 24 months later it’s $1.7 trillion.