Brace For Impact
“The Congressional Budget Office (CBO) projects a balanced budget by 2012. A number of CBO’s assumptions underlying this projection are, to say the least, problematic. For example, CBO’s projections assume that all of the President’s 2001 and 2003 tax cuts, as well as all other temporary tax cuts, are allowed to expire and that the Alternative Minimum Tax is not fixed before it digs further into middle-class incomes. CBO is also required by law to assume that there will be no more appropriations for the conflicts in Iraq and Afghanistan and for Gulf Coast reconstruction; that the pending reconciliation budget will have no effects; and that discretionary spending will not grow at all, in inflation-adjusted terms. With all these caveats in place, CBO’s budget baseline is extremely unrealistic.
To present a more realistic picture of the federal budget over the next ten years, Heritage Foundation analysts corrected these shortcomings in CBO’s projections. The numbers in this paper are based on CBO’s projections but also include the following:
* CBO numbers for extending the tax cuts and fixing the AMT;
* CBO numbers on gradual phase-downs in Iraq and Afghanistan;
* CBO numbers for past Gulf Coast reconstruction spending, as well as modest Heritage Foundation estimates of future appropriations;
* CBO numbers for the reconciliation bill about to be signed into law;
* A 5-percent annual increase in defense discretionary outlays (excluding supplemental bills)
after 2006; and
* A 2-percent rise in non-defense discretionary outlays (excluding supplemental bills) in 2006 and a 4-percent annual increase thereafter.
With this more realistic set of assumptions in place, several points become clear:
1) Budget deficits are far larger than CBO projects.
Realistic baseline assumptions show that the federal budget is in much worse shape than the CBO’s baseline numbers indicate. While CBO projects a balanced budget by 2012, it is far more likely that the deficit will explode:
* The deficit will reach $394 billion in 2006;
* $412 billion in 2007;
* $428 billion in 2008;
* $436 billion in 2009;
* $458 billion in 2010; and
* $805 billion in 2015.
By 2015 it would it take a $6,500-per-household tax increase just to balance the budget.”
Think about that next time the Administration shovels Fear, Emotion and the Baby Jesus at you.