Although CBO's analysis of the President's budget is the newsmaker in March in the budget world, CBO also updates its current law baseline, which shows slightly lower deficits from 2013-2022 than it projected in January. Compared to January, ten-year deficits have shrunk by $186 billion from $3.1 trillion to $2.9 trillion.
Last year, when the President's budget used overly optimistic economic assumptions and various magic asterisks, we re-estimated their budget using more realistic assumptions. As it turns out, our estimates were quite close to CBO's estimate of the President's budget; the President claimed to get debt down to 77 percent of GDP by 2021, we estimated it would be at 87.4 percent, and CBO found it would get to 87.5 percent.
We noted earlier this week that CBO's current law economic assumptions in the near-term do not look very stellar, especially in 2013 when the economy is scheduled to absorb a large fiscal shock as a large number of tax cuts expire and the "sequester" resulting from the failure of the Super Committee cuts spending automatically across-the-board.
Yesterday, CRFB released its analysis of the latest budget projections from CBO, discussing debt, deficits, spending, and revenues. We also updated the CRFB Realistic Baseline in our analysis to give a more realistic view of where the country is headed. Not surprisingly, it shows much higher debt and deficits than CBO's current law projections.
CBO has a new report out, comparing federal and private-sector compensation for employees. The report shows that, on average, federal employees are compensated more than private-sector employees with similar educational backgrounds and other characteristics; however, the story is not as simple as it would appear.
CBO has gotten into the infographic game this year with some good results. Two days ago they released an infographic containing a basic breakdown of the budget and historical trends.
In a letter to Rep. Chris Van Hollen (D-MD), the ranking member of the House Budget Committee, CBO Director Douglas Elmendorf estimates the cyclical economic effects due to a slowed economy on the size of the federal deficit. He finds that cyclical effects will contribute $340 billion to the deficit this fiscal year, which is roughly one third of the $973 billion (or 6.2 percent of GDP) deficit projected for FY 2012.
In CBO's latest Budget and Economic Outlook, CBO includes revised projections of various economic indicators as part of its update. Since there is such a major relationship between economic conditions and fiscal policy, these numbers are of significant importance. CBO's latest economic projections do contain worse real GDP growth for the first few years, but much faster growth mid-decade.