Don't Pop the Corks: CBO Outlook for the Federal Budget Is Still Bleak
End Notes
[1] Congressional Budget Office, TheBudget and Economic Outlook: An Update, August 2006.
[2] See Office of Management and Budget, Mid-Session Review of the Budget for Fiscal Year 2007, July 11, 2006, and Congressional Budget Office, An Analysis of the President’s Budgetary Proposals for Fiscal Year 2007, March 2006. CBO’s March baseline projection of the 2006 deficit under then-current policies was $336 billion. Legislation enacted since then (primarily additional funds for the war in Iraq and an extension of alternative minimum tax relief) has added an estimated $30 billion to the deficit. Thus, CBO’s March projection implied a deficit of $366 billion under the policies that have actually gone into effect.
[3] That level of revenues is about $100 billion higher than CBO projected in March. CBO assumes that the bulk of this unanticipated increase in revenues is due to temporary factors, such as corporate profits in 2006 that are at historically high levels relative to the size of GDP, and adjusts its projection of revenues for economic and technical factors upward by declining amounts in future years (the adjustment is less than $20 billion in 2016).
[4] Richard Kogan and Matt Fiedler, “Even With New Budget Projections, Budget Deterioration From 2000-2006 Will Be the Largest 6-Year Deterioration in Half a Century ,” Center on Budget and Policy Priorities, revised August 17, 2006.
[5] Our adjustments to CBO’s current-policy baseline projections (including an adjustment to reflect the assumption that emergency appropriations enacted in 2006 will not be repeated in each year through 2016) are based on estimates provided by CBO in Table 1-8 of the Budget and Economic Outlook: An Update.
[6]Budget and Economic Outlook: An Update, p. ix.
[7] See Aviva Aron-Dine, Joel Friedman, Richard Kogan, and Isaac Shapiro, “The Recent Upturn in Revenues and OMB's Mid-Session Review,” Center on Budget and Policy Priorities, revised July 14, 2006.
[8] See Isaac Shapiro, Richard Kogan, and Aviva Aron-Dine, “How Good is the Current Economic Recovery?,” Center on Budget and Policy Priorities, revised August 4, 2006.