James Pethokoukis

Politics and policy from inside Washington

Study: U.S. budget deficit could average $1.4 trillion a year for a decade

August 26, 2009

Change a few assumptions and those government budget forecasts start to look scary. The Concord Coalition makes a few tweaks to the Congressional Budget Office model:

1) The Concord Coalition takes the CBO baseline and adjusts it to assume appropriations increase at the same rate as the economy (GDP growth). This increase is closer to the historical average rate of increase.

2) We also assume that supplemental appropriations do not continue indefinitely. For recent appropriations for the wars in Iraq and Afghanistan, we include realistic estimates from CBO about how much will be spent under a scenario where troop levels slowly decrease to about one-third of their level at the time of the estimate.

3) For taxes, we assume that all of the major tax cuts will be extended beyond 2010.

4) We also assume the one-year patches to the Alternative Minimum Tax will continue to be enacted, holding the level of taxpayers hit by the tax roughly constant throughout the baseline period.

5) Finally, we include a calculation for the increased debt service (interest payments) that these policies would cause by their increasing the deficit. We do not make any changes to CBO’s economic assumptions.

And here is what all that looks like as a pretty picture:

082609deficit

Comments

Here is a novel solution. Disband the Federal government entirely, and leave everything up to the states. To be honest, individual states have basically been robbed by the Federal government, and their contributions appropriated inefficiently. Why do we really need the Federal government anyway, expect to provide for the defense, issue currency, and mediate disagreements between states?

While I am sure that the deficit will be reigned in, just as it was during the Clinton years, we will always be faced with these dilemmas. The common interest is not especially common, and certainly varies by region. Why should one region or state be held hostage by another? With some states already offering expanded healthcare options, why do we need universal coverage? The deficit is a product of a runaway unregulated federal government. With all this talk of regulation, who regulates the Federal gov?

Posted by Greg | Report as abusive
 

Maybe, the deficits could be raised from 1.4 to 14 trillion a decade, so that the Americans sustain their living standards without any need to work. This path is also suggested by the fact that the year 2010 in the graph has been upgraded to 20010. :-)

 

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