Long-Term Budget Outlook: It’s Not Pretty

The Congressional Budget Office recently released its projections for federal revenues and outlays in the coming decades. Its baseline assumptions are that the Bush tax cuts are eliminated and that the Alternative Minimum Tax is not reformed, thus ensnaring more and more middle-income people over time. Even with these tax rises assumed, national debt increases substantially, and the percentage of the economy devoted to servicing the debt quadruples within 25 years.

Keep in mind that CBO estimates are notoriously optimistic and never account for economic shocks that always occur from time to time in the real world, so there’s a 99% chance that it is low-balling what the actual debt numbers will be by that time.

The “alternative” scenario, which is more realistic because it assumes that tax revenue will remain closer to the historic average of 18% of GDP, shows the debt increasing to 190% of GDP in 25 years. That’s much higher than Greece’s debt level is today, and if you’ve been watching the news at all, you know how well things are going in that country.

Those kind of numbers might actually be scary enough to make Congress and the president grow backbones and cut some spending, but let’s not hold our breaths. They’ve kicked the can for so long, they may not know what else to do.

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About Dr. J

I am an Associate Professor and head of the Department of Humanities at Faulkner University. I am also Associate Editor of the Journal of Faith and the Academy.
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2 Responses to Long-Term Budget Outlook: It’s Not Pretty

  1. worldtake says:

    Or,
    Maybe the rich and corporations, along with the rest of us will have to pony-up and except that we have a country that has to be paid for, instead of allowing ourselves to be influenced by the selfish narcissistic libertarians, and tea morons who don’t want to pay for anything except their own stuff.

    I have the perfect solution — a new modest proposal — I suggest that we fence in a large area of the Badlands, allow anyone who would like to get out of paying taxes go there and homestead. Each one of these people, would be allotted a piece of land for free, that they could then supply the entire infrastructure to — roads, utilities, etc. How long would it take before these pioneers elected officials and levied taxes? A week?
    The fact is, that when the Bush republicans took power, our budget was nearly balanced and the supposed conservative Bush and his evil puppeteers flushed us right down the debt toilet by firing the country up with his jingoistic propaganda(lies) about Iraq being responsible for 911, when any of us with functioning critical minds and any vague sense of world politics, knew this was IMPOSSIBLE, while at the same time, cutting back on controls against mega-corporations and financial institutions – the former, with their sociopathic practices, plunging us into the current worldwide depression we are now experiencing.

    • Dr. J says:

      Ross, I welcome your participation on this blog as a splendid opportunity for me to develop the Christian virtue of patience. This is the third or fourth time you have posted comments on this site attempting to stir up class hatred and accusing those who disagree with you of being selfish morons who “want a country but aren’t willing to pay for it.”

      On each occasion I have replied that you are overlooking or misstating important issues (see here for an example). Then a few weeks or months later you return to post essentially the same comment without taking into account anything I’ve pointed out.

      So, to reiterate: blaming all of America’s problems on George W. Bush is partisan silliness. Our economy and our process of government budgeting in particular have been structurally unsound for several decades. Even in the Clinton years, the budget was never really balanced. Despite a spike in tax revenue resulting from an unsustainable tech bubble, the debt went up every single year, although this was masked in the figures the media threw around because they did things like count Social Security payroll taxes as general revenue.

      When tax revenues as a percentage of the GDP stay pretty consistent for fifty years, and then spending explodes to unprecedented proportions, the problem is not that we don’t pay enough taxes. The problem is that we aren’t controlling spending adequately. This should not be a difficult thing to understand.

      But hey, if you want to fight for repealing everything since 2000, I’ll sign on. Not only will we get out of Iraq, Afghanistan, and Libya, we’ll do away with No Child Left Behind, the Medicare prescription drug benefit, Obamacare, the Patriot Act, and all the bailouts. That sounds like a pretty good start.

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