Is the federal budget heading for unsustainable deficits or unsustainable surpluses?
It all depends on the long-term assumptions.
Last week, the Government Accountability Office (GAO) issued an update of its long-term fiscal outlook for the federal government. As in prior reports, GAO found that an extension of current law (the Baseline Extended simulation) leads to rising and eventually unsustainable debt “driven by a fundamental imbalance between revenue and spending, which, on the spending side, is driven by the aging of the population and rising health care costs.”
On the other hand, the President's Office of Management and Budget (OMB) released a new estimate last week showing that an extension of President Obama's budget policies would not just be sustainable but would lead to growing surpluses that would eventually pay off the national debt.
Not that OMB thinks this will actually happen. In fact, OMB calls the end result “unrealistic and undesirable.”
As explained by OMB in the Analytical Perspectives of the 2014 Budget, “These projections are not intended to be a prediction of future legislative action, nor are they intended to reflect explicit policy proposals for the years beyond 2023; rather, they are a mechanical extrapolation of the Budget policies.”