WASHINGTON -- The Concord Coalition warned policymakers and political candidates, including President Bush and Senator Kerry, that today's new projections by the Congressional Budget Office (CBO) confirm the need for tough policy choices to bring the budget back into balance. Trying to have it all - guns and butter and tax cuts - risks a decade of large chronic deficits at a time when the Federal government needs to improve its fiscal position before the impact of the baby boomers' retirement and health care costs begins to hit.
“With Congress back in town and the presidential candidates making some expensive promises on the campaign trail, these numbers are a timely reminder that the deficit is a serious problem needing serious attention. It is not going to go away on its own. Even assuming strong economic growth, today's numbers show deficits persisting for as far as the eye can see. Regardless of who wins the presidency or which party controls Congress after the elections, they are going to have to deal with the deficit,” said Concord Coalition Executive Director Robert Bixby.
In today's report, CBO estimates that the 2004 deficit will be $422 billion (3.6 percent of GDP). Last year's deficit was $375 billion (3.5 percent of GDP). In dollar terms, these are the two largest deficits in our nation's history. Measured as a share of GDP, they are the worst back-to-back deficits since 1992-93.
“It is important to recognize that the deficit is still going up. Despite an improvement from the March baseline, this year's deficit will be nearly $50 billion higher than last year's deficit. Moreover, the projected deficits beyond 2006 have worsened somewhat and the total 10-year deficit of $2.3 trillion is the highest CBO has published since 1997. Even this is probably optimistic because it does not assume policy changes that are popular with members of both parties, such as the extension of expiring tax cuts, or an adjustment to the alternative minimum tax. It also assumes a substantial slowdown in the recent growth rate of appropriations - from about 7 percent annually to 2.5 percent. Under more plausible political assumptions the 10-year outlook shows a deficit of roughly $5 trillion,” Bixby said.
“These numbers do not present a hopeless scenario. They do, however, present a serious challenge for lawmakers and candidates. All priorities must be reexamined to ensure that the budget can be brought into balance again and that we return to a position of fiscal strength in time to deal with the even greater long-term challenges,” Bixby said.