WASHINGTON -- With today’s release of a Congressional Budget Office (CBO) report estimating that the President’s budget would result in annual deficits averaging more than $900 billion over the next 10 years, The Concord Coalition pointed out that much of the fiscal damage would be caused by abandoning pay-as-you-go rules (PAYGO) for $2.6 trillion of policy decisions -- the largest of which would permanently extend most of the tax cuts due to expire over the next two years.
“The deficit and debt numbers in today’s report are truly staggering. We cannot afford to follow the path projected for the President’s budget by CBO. Within 10 years, debt would double and interest costs would be three times higher as a share of the economy. With the baby boomers moving into their retirement years, there is no reason to believe that the numbers would not deteriorate further unless we make some very hard choices. A good place to start would be to enforce PAYGO, not just for new initiatives as the President says he will do, but for existing policies as well. If we don’t, it will be much harder to get back to a more sustainable fiscal course,” said Robert L Bixby, Executive Director of The Concord Coalition.
The CBO report shows that the new official, current-law baseline produces a 10-year deficit of $4.4 trillion. This is $1.3 trillion worse than they forecast in January due to the cost of newly enacted legislation ($1.3 trillion, primarily the recovery package) and a deteriorating revenue base (another loss of $1.3 trillion). Partially offsetting those worsening factors was that lower interest rates and inflation reduce government outlays by $1.4 trillion. Another $140 billion was added to the 10-year deficit due to technical changes. Concord noted that the previous CBO baseline deficit was already $1.5 trillion worse than the current-law baseline the Administration showed in its February budget documents because CBO had already been more pessimistic than the Administration in their economic forecast.
“The biggest single proposal in the Obama budget contributing to the deterioration in the 10-year budget outlook is not spending on bailouts or stimulus or even longer-term health care reform, and not temporary tax cuts that are designed to provide immediate stimulus to the economy at only near-term cost, but rather permanent extension of most of the 2001 and 2003 tax cuts – with costs that grow dramatically over time. It explains why the Obama budget, according to CBO projections, will not only fail to make trillion-dollar-plus deficits an extraordinary and temporary phenomenon but will fail to stabilize the public debt as a share of GDP,” said Concord Coalition Chief Economist Diane Lim Rogers.
“President Obama and Congress face a policy choice regarding extension of the expiring tax cuts. In fact, Congress will have to write and pass new legislation, which President Obama will have to sign, in order to keep any of the Bush tax cuts beyond December 31, 2010. They will then become the Obama tax cuts and not the Bush tax cuts, and they will still add nearly $2 trillion to the deficit,” Rogers said.
The Concord Coalition is a nonpartisan, grassroots organization dedicated to balanced federal budgets and generationally responsible fiscal policy. Former U.S. Senators Warren Rudman (R-NH) and Bob Kerrey (D-NE) serve as Concord's co-chairs and former Secretary of Commerce Peter Peterson serves as president.