The Congressional Budget Office (CBO) released new projections last week that show why Washington should commit to long-term fiscal reforms while dealing with some important budget decisions that must be made by the end of this year.
“Once again, CBO’s projections show that if politicians don’t deviate from current policies, the country will continue down an unsustainable path that threatens to weaken the country, jeopardize our standard of living and leave our children and future generations with unmanageable levels of government debt,” said Robert L. Bixby, Concord’s executive director.
The non-partisan budget office said the federal deficit for Fiscal 2012, which ends Sept. 30, would total $1.1 trillion. That would be down slightly from the CBO’s March projection but it would still be the fourth consecutive annual deficit of more than $1 trillion.
The CBO offered two sets of projections for the coming decade. The first assumes that current laws would generally remain in effect, including sharp spending reductions and the expiration of the 2001 and 2003 tax cuts at the end of this calendar year. This “fiscal cliff” would likely cause a recession next year, CBO warned, but would mean lower deficits in future years.
CBO’s “alternative scenario” assumes that elected officials will change certain laws to continue certain current policies. It is similar to Concord’s Plausible Baseline, which makes certain reasonable assumptions about future congressional action.
Both Concord’s Plausible Baseline and the CBO’s alternative scenario paint a darker long-term picture than the CBO’s first set of projections.
“While it is important to support the economic recovery,” Bixby said, “Washington should also be laying the groundwork for the big fiscal reforms that are necessary to put the federal budget on a more responsible track over the long term. It is possible to do both, but this will require more thoughtful policy-making and greater bipartisanship than we have seen in Washington recently.”