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www.crfb.orgApril 20, 2004
THE CURRENT COURSE:
Deficits “As Far as the Eye Can See”
Joint statement: HTML, PDF Press release: HTML, PDF Methodology: HTML, PDF Full Media Packet (12pp. PDF) |
If you cannot access the files through the links, right-click on the underlined text, click "Save Link As," download to your directory, and open the document in Adobe Acrobat Reader. |
Last month, the Congressional Budget Office (CBO) issued new budget projections that show the federal government running a large cumulative deficit over the next ten years. As CBO acknowledges, however, its baseline projection is unrealistically optimistic, since it does not include the cost of continuing current policies, such as the recent tax cuts. As explained below, we adjust the CBO baseline to take into account those costs that are likely or inevitable if policymakers fail to take budget discipline seriously and the country continues on its current course.
To arrive at these projections, we make the following adjustments to the CBO baseline[2]:
Adjustments to CBO Deficit Projections (in billions of dollars) |
|||||||||||
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
Total |
|
CBO March 2004 projections |
-363 |
-273 |
-274 |
-286 |
-281 |
-272 |
-176 |
-38 |
-34 |
-15 |
-2,012 |
Tax cut extension |
-18 |
-38 |
-44 |
-48 |
-59 |
-59 |
-203 |
-316 |
-345 |
-379 |
-1,510 |
AMT relief |
-10 |
-27 |
-36 |
-46 |
-59 |
-73 |
-88 |
-103 |
-122 |
-145 |
-708 |
Defense, international, and homeland security |
3 |
-9 |
-10 |
-16 |
-19 |
-39 |
-52 |
-57 |
-74 |
-79 |
-351 |
Domestic discretionary (excl. homeland sec.) |
6 |
8 |
7 |
4 |
1 |
-3 |
-7 |
-12 |
-17 |
-23 |
-37 |
Resulting deficit projections |
-381 |
-340 |
-358 |
-392 |
-417 |
-446 |
-526 |
-526 |
-592 |
-641 |
-4,618 |
Resulting deficit projections as a percent of GDP |
3.2% |
2.7% |
2.7% |
2.8% |
2.9% |
2.9% |
3.3% |
3.2% |
3.4% |
3.5% |
3.1% |
Notes: Negative values indicate deficits or costs that increase deficits. Positive values reflect surpluses or policies that reduce deficits. All figures include both the policy’s direct costs and the additional interest costs it generates. |
End Notes:
[1] In September 2003, the Center on Budget and Policy Priorities, the Committee for Economic Development, and the Concord Coalition jointly released a report projecting cumulative deficits of cumulative deficits of $5 trillion over the ten year period from 2004-2013. We currently project lower deficits, but the improvement is entirely explained by the fact that, unlike in last fall’s report, we now assume that the bonus depreciation tax cut — that was enacted in 2002 and enlarged in 2003 and is scheduled to expire after 2004 — will not be extended. The Administration did not propose extension of this provision in its FY 2005 Budget. Nonetheless, some policymakers continue to advocate extension, and the fate of bonus depreciation remains unclear. If this provision were extended, we would currently project deficits of $5.0 trillion over the 2004-2013 period and deficits of $5.2 trillion for the ten year period from 2005-2014.