WASHINGTON -- With today's budget update by the Congressional Budget Office (CBO) showing the deficit shrinking from $412 billion in 2004 to $331 billion this year, The Concord Coalition urged lawmakers, the public and the media to heed the warnings in the report's fine print. Under plausible assumptions about current tax and spending policies, Concord estimated that deficits would total $2.1 trillion over the next five years and $5.7 trillion over the next 10 years.
“On the surface, the new numbers might be looked at as encouraging because the deficit will come down this year. That, of course, is good news. But before the celebrations begin, it is important to recognize that there is a lot of red ink in the fine print of today's report. Despite a strong economy we are still facing deficits for as far as the eye can see. Any improvement seen in the budget outlook is primarily due to unanticipated revenues rather than hard choices on spending and tax policies,” said Robert L. Bixby, executive director of The Concord Coalition.
“When Congress and the President return to Washington in September, they would do well to observe the warning signs in CBO's report; specifically that much of this year's revenue surge is likely to be temporary and that spending pressures will begin to ratchet up substantially by the end of the decade as the baby boomers begin to retire. The most important point to take from this report is that current fiscal policy remains unsustainable,” Bixby said.
The Concord Coalition's plausible baseline scenario, based on today's CBO report, assumes that all expiring tax provisions (including the 2001 and 2003 tax cuts) are made permanent and that relief from the Alternative Minimum Tax is extended. It also assumes discretionary spending will rise at the same rate as economic growth (GDP), not inflation, and that funding for operations in Iraq and Afghanistan will slow gradually from 2005 levels over the next 10 years. In total, these plausible assumptions add $3.6 trillion of deficits to the CBO's $2.1 trillion 10-year baseline projection.
“Today's report provides no comfort for those who hope that deficits will simply fade away on their own. Political leaders are going to have to do something about them -- by spending less than they would like or by taxing more. The sooner they, and the public, face up to this fact the better,” Bixby said.
Current Policy Trends Lead to Large Sustained Deficits: FY2005-2015 (PDF, Adobe Acrobat Required)