New Deficit Numbers: Really Bad, and Getting Much Worse
The Congressional Budget Office released new budget estimates
yesterday, and the news is not good. Adjusting its "baseline" to
actual spending and revenue trends, CBO said the federal budget
deficit would grow to a new world-record $480 billion next year.
Worse yet, the number-crunchers estimated that cumulative budget
deficits over the next 10 years would reach $5.8 trillion.
Recall that CBO was estimating 10-year budget surpluses of more
than five-and-a-half trillion dollars when George W. Bush took
office, and you get an idea of the breathtaking deterioration of
the country's fiscal condition in less than three years.
The Bush administration reacted to this very bad news in its
accustomed What-Me-Worry fashion, suggesting that the economic
growth that's just around the corner will wipe out deficits, and
that after all, no one estimated the budget surpluses of the
1990s 10 years out.
These responses are, to use the online abbreviation, LOL
(laughing out loud) hilarious. The CBO estimates already assume
a big, booming economic recovery beginning next year and
continuing throughout the rest of the decade -- hardly a lead
pipe cinch, especially if public borrowing continues to spike
ever upwards. Furthermore, the surpluses of the 1990s did not
magically appear due to some fortuitous economic growth. There
was, ahem, that big deficit reduction package forced through
Congress by the Clinton administration in 1993 without a single
Republican vote (the package, you may recall, that Republicans
said would produce a deep recession), along with a balanced
budget agreement that President Clinton signed in 1997. Most
economists would say that these acts of fiscal discipline helped
produce the sensational economy of the late 1990s.
Today, if anything, CBO is underestimating the vast borrowing
binge the federal government is about to undertake so long as the
Bush administration is the drunken sailor with the national
credit card. Progressive Policy Institute senior economist Jeff
Lemieux adjusted the CBO estimates to reflect what will happen if:
The tax cuts enacted since 2001, which CBO assumes will vanish
in 2011 due to the phony sunsets placed in tax legislation to
disguise their real cost, are in fact made permanent.
Discretionary spending (which includes defense) grows at least
as fast as the economy, an extremely conservative estimate.
A Medicare drug benefit costing at least $400 billion over 10
years is enacted (both Houses of Congress have passed, and the
administration supports, a drug benefit that will cost at least
that much).
Congress acts to index or otherwise adjust the Alternative
Minimum Tax, which will soon start to bite into upper-middle-
class incomes in a politically intolerable way within the next
couple of years.
With these vastly more realistic assumptions, Lemieux calculates
that the budget deficit will reach a cool half-trillion next
year, and will total $6.1 trillion a decade from now, or an
alarming five percent of the gross domestic product. The
national debt, which we were seriously talking about retiring
altogether towards the end of the Clinton administration, would
reach $10 trillion a decade hence. At that point, annual debt
service alone would be $526 billion, considerably more than
today's defense budget. And then, mind you, things would really
start to get down and dirty due to the retirement of the baby
boom generation, and the massive new Social Security and Medicare
costs that phenomenon will entail. Indeed, according to Lemieux,
on the Bush administration's present trajectory, deficits will
rise from 6 percent of GDP in 2015 to 12 percent by 2025, while
the national debt will grow from 60 percent of GDP to 120 percent
by 2025.
It's very important for Democrats and responsible Republicans to
start talking about these numbers in a simple and vivid way as
part of the evaluation of the Bush administration's stewardship
of the national budget and the national economy in 2004. These
folks are on a reckless path in which our nation's solvency, the
vibrancy of our national economy, the ability of government to
provide for the common defense and other common needs, and the
opportunities to be enjoyed by future generations, are all being
sacrificed to a monomaniacal determination to cut taxes on the
wealthy without the courage to cut spending to make ends meet.