January 24, 2004

By Richard Kogan

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The most recent ten-year "baseline" projection of the federal budget, issued by the Congressional Budget Office in September 2004, showed deficits totaling $2.3 trillion over ten years.  When CBO issues a new baseline projection tomorrow morning, the official ten-year deficit will appear to be substantially lower.  However, approximately $1.7 trillion of this apparent improvement in the budget outlook will be artificial — $1.7 trillion of the decline will not indicate any fundamental improvement in CBO's view of future economic growth, future revenue collections, or future budgetary outcomes.  There are two primary reasons that about $1.7 trillion of the decline will not be real.

Together, the $1.4 trillion shift in projections because of the removal of Iraq funding and the $0.3 trillion shift from the change in the ten-year period mean that approximately $1.7 trillion of the apparent decline in ten-year deficits will represent no actual change in the underlying budget picture.

End Notes:

[1] CBO will project forward approximately $11 billion in supplemental 2005 funding for the fall hurricanes, but this is a marked reduction from the $115 billion per year, plus inflation, in supplemental funding included in the September projection.