New Budget Brief from The Concord Coalition

The Concord Coalition has released an issue brief analyzing President Bush's budget for the fiscal year that will end on September 30, 2009 - the last budget that President Bush will submit.

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."

Comments

[R Davis]

That doesn't overly surprise me. For years, there has been a table of long-run budget projections included in the Analytical Perspectives of the U.S. Budget and, as long as I can remember, it has likewise projected skyrocketing deficits and debt. I've posted the latest numbers at http://home.att.net/~rdavis2/pro2009.html . As can be seen, it projects that the debt will reach 283 percent of GDP by 2080 (or 154 percent if large savings in entitlements are achieved). This isn't quite as high as the GAO but I think the numbers may be overly optimistic for the reasons listed at http://home.att.net/~rdavis2/pro2008.html . In any event, the debt reaches a high enough level that the model would likely blow up, same as the GAO model.

[john vercellone]

you dont mention foreign ownership of the american economy which would continue to grow beyond its over 20per cent now in 2008 to no less than 50per cent of the usa economy by 2020 all this with added public,consumer,national defense,infrastructure,liberty/freedom and contingent debt increasing.we are not a democracy anymore we are a socialist plutocracy.we became a plutocratic socialist nation at the founding of your organization in 1992