WASHINGTON — The Concord
Coalition warned today that new projections by the Congressional Budget Office (CBO)
show a worsening budget outlook and the first ominous signs of fiscal strain
brought on by the baby boomers’ retirement.
WASHINGTON — The Concord
Coalition warned today that new projections by the Congressional Budget Office (CBO)
show a worsening budget outlook and the first ominous signs of fiscal strain
brought on by the baby boomers’ retirement.
On an apples-to-apples basis, today’s projected 10-year
deficit is $500 billion deeper than it was in CBO’s September 2004 report. When
plausible assumptions about the path of current tax and spending policies are
used, the official baseline deficit of $855 billion balloons to a deficit of
$5.8 trillion.
“No one should be lulled into thinking that this is a good
news report. To the contrary, it is further confirmation that fiscal policy is
on a dangerous path. Even with a strong economy, annual deficits are likely to
hover between $400 and $500 billion for the next five years. After that, the
combination of tax cut extensions and growing entitlement costs threatens an
upward spiral of deficits and debt that cannot be sustained,” said Concord
Coalition Executive Director Robert Bixby.
“While much attention will understandably be paid to the
short-term outlook and to questions such as whether the deficit will set another
record this year (it’s possible), or whether the goal of cutting the deficit in
half over five years can be achieved (it seems doubtful), the aspect of today’s
report that merits more attention is that the fiscal and economic impact of the
baby boomers’ retirement is clearly coming into view. The slowing of labor force
growth reduces CBO’s projection of economic growth by the end of the decade and
the boomers’ eligibility for retirement benefits accelerates spending growth,”
Bixby said.
“To make matters worse, these factors hit at the same time
that the extension of tax cuts enacted over the past few years will drain more
than $1 trillion in revenues. It is this fiscally toxic combination that poses
the biggest challenge for the future,” Bixby added.
Concord highlighted the following numbers from today’s CBO
report:
-
Assuming continued, but declining, spending for the
global war on terrorism increases the 10-year deficit by $418 billion.
-
Assuming that discretionary spending keeps pace with
economic growth (rather than inflation) increases the 10-year deficit by $1.4
trillion.
-
Assuming that all expiring tax cuts are extended
increases the deficit by $1.6 trillion.
-
Assuming continuation of recent adjustments in the
alternative minimum tax (AMT) increases the deficit by $642 billion.
-
Increased debt service charges for all of the above
changes totals $810 billion.
-
Freezing appropriations (including defense, the war on
terrorism and homeland security) would save $1.3 trillion (including lower
debt service). However, if combined with the extension of tax cuts and
continued AMT relief, the budget would still remain in deficit every year,
totaling $2.2 trillion over the next decade.
Chart:
Current Policy Trends Lead to Large
Sustained Deficits: Fiscal Years 2005-2015 (PDF format; Requires
Adobe Acrobat Reader)
The Concord Coalition is a nonpartisan, grass roots
organization dedicated to balanced federal budgets and generationally
responsible fiscal policy. Former U.S. Senators Warren Rudman (R-NH) and Bob
Kerrey (D-NE) serve as Concord’s co-chairs and former Secretary of Commerce
Peter Peterson serves as president.
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CONTACT:
Harry
Zeeve:
(703) 894-6228
[email protected]
