The Concord Coalition said today that a
new letter released by the Congressional
Budget Office (CBO) confirms the need for tough choices on
spending and tax policy to avoid sustained budget deficits of $400 billion or
more over the coming decade. The letter, written in response to a specific
request from Representative Charles Stenholm (D-TX), projects a 10-year deficit
of $4.4 trillion after using more realistic assumptions about the likely path of
current fiscal policies than CBO can use in its official baseline.
“This letter is very significant because it demonstrates that even with the strong economic recovery assumed by CBO and the tight discretionary spending restraint assumed in the President's budget, deficits over the next 10 years are likely to average $439 billion a year while debt held by the public grows from 37 percent of GDP today to over 47 percent by 2013. We are not facing a temporary deficit that will go away as the economy picks up. We are back to facing endless deficits. They will not go away without specific actions by Congress and the President,” said Robert L. Bixby, Executive Director of The Concord Coalition.
“Moreover, these deficits come at a particularly bad time - just as the enormous fiscal challenge of funding the health care and retirement benefits for the huge baby boom generation begins to hit at the end of this decade. Instead of adding new burdens onto the backs of future taxpayers by running up the debt, we should be debating policy changes that ensure a long-term, sustainable fiscal policy. Unfortunately, as Federal Reserve Board Chairman Alan Greenspan recently warned, the current debate in Washington is more about ways to increase deficits rather than bring them under control. That must change. To avoid unsustainable deficits, Congress and the President must decide if they want to cut spending to match the lower revenue projections, or raise revenues to match their spending priorities,” Bixby said.
In response to Representative Stenholm's request, CBO's letter to him assumed permanent extension of the 2001 and 2003 tax cuts, continued relief from the alternative minimum tax at its 2004 level, passage of a $400 billion Medicare prescription drug benefit, the President's discretionary spending proposals, and a gradual reduction in the costs of operations in Iraq and Afghanistan. In September, The Concord Coalition, the Committee for Economic Development and the Center on Budget and Policy Priorities, released a similar projection showing that under current fiscal policies the deficit would likely total $5 trillion over the next 10 years.