The Congressional Budget Office (CBO) today released a ten-year budget baseline showing $6 trillion in deficits over the next decade. Yet because Congress requires the CBO to include all sorts of unrealistic assumptions (that all tax cuts will expire, that the AMT will never again be patched, that discretionary spending will barely move for a decade), some adjustments must be made.
After building a true budget baseline, the sobering result shows ten-year deficits of $13 trillion. The annual budget deficit never falls below $1 trillion. By 2019, the debt is projected at $22 trillion, or 98 percent of GDP.
These deficits are driven by spending. Even if all the 2001 and 2003 tax cuts were extended and the AMT were patched, 2020 revenues would be just 0.7 percent of GDP below the historical average. Yet 2020 spending would be 5.2 percent of GDP above the historical average. This means that 88 percent of the additional deficits would come from higher spending and only 12 percent would come from lower revenues.
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