According to the Coalition, the Bush budget
remains faithful to the themes advocated by the administration throughout its tenure in office - keep taxes low, allocate higher resources to defense and homeland security, defer a solution to the growing toll of the Alternative Minimum Tax (AMT) and rely on assumptions of future austerity to make the numbers work.
The President's budget projects a five year (2009 - 2013) deficit of nearly $600 billion, but small annual surpluses in the out years of 2012 and 2013. The Coalition points out that this projection is based on at least three questionable assumptions. These are
1. A revenue windfall from the Alternative Minimum Tax (AMT),
2. A sudden drop-off in new funding for the wars in Iraq and Afghanistan (from nearly $200 billion in 2008 to zero in 2010 and beyond), and
3. Annual reductions in domestic discretionary spending beyond 2009.
Under reasonable assumptions, some of which counter the above, the projected five-year deficit rises to $1.8 trillion, with significant annual deficits in the out years.
These deficits will be happening at a time when an aging population will be contributing to a long-term "double whammy" - slowing labor force growth and increased demands for entitlement spending.
When the focus changes to the longer term, the picture becomes quite grim. The Concord Coalition cites a scenario prepared by the Government Accountability Office (GAO), which assumes that current economic and fiscal trends continue: "discretionary spending grows with the economy, entitlements are kept on autopilot and revenues are held at 18.6 percent of GDP, which is roughly the historic level over the past 40 years."
Under this scenario, in less than twenty years, in 2027, Social Security, Medicare, Medicaid, and net interest would consume all revenues - and the deficit would hit 10 percent of the Gross Domestic Product. Ten years later, in 2037, debt held by the public would equal 200 percent of GDP. By 2048, interest costs would exceed the size of today's budget. And by 2053, the "GAO model blows up because the economy is in ruins."