WASHINGTON -- With new estimates by the Congressional Budget Office (CBO) showing annual budget deficits through 2005 and the projected 2002-2011 surplus virtually wiped out, The Concord Coalition warned today that fiscal policy is at a crossroads. The government's rapidly deteriorating fiscal outlook poses a serious challenge for Washington policymakers. Failure to make appropriate adjustments in budget policy could turn a manageable problem into a crisis.
“The prospect of large and growing budget deficits once again threatens the nation's fiscal outlook. Congress and President Bush have some hard choices to make when they return from vacation. We can afford a modest and brief deficit in response to emergency needs. But we already have too many unfunded entitlement promises lurking just beyond the 10-year budget window to become complacent with a decade of deficits. Throwing open the Treasury to all manner of costly election year promises would be even more irresponsible,” said Robert Bixby, Executive Director of The Concord Coalition.
While today's new numbers from CBO show declining deficits and the return of surpluses by 2006, they are only a baseline. The $1 trillion surplus now projected for 2003-2012 could easily become a $1 trillion dollar deficit if the President's $1.7 trillion worth of proposals for higher national security spending and lower taxes are enacted along with a Medicare prescription drug benefit costing in the range of $350 to $600 billion as the leading congressional proposals do.
“Politicians and voters alike need to adjust to a new playing field. Much of the huge projected surplus turned out to be a mirage. As a result, proposals that once seemed affordable now add up to perpetual deficits and rising debt. Such proposals, whether prospective tax cuts or new spending initiatives, must be reexamined to ensure that we can return to a position of fiscal strength before the enormous cost of the baby boomers retirement and health care begins to hit the budget by the end of the decade,” Bixby said.
“Given that the baseline is probably a best case scenario, it should be clear that we cannot have it all. The brief era of budget surpluses is over. Congress and the President need to ensure that a new era of prolonged deficits does not begin,” Bixby said.