Hill Budget Office Sees $477B Deficit

[papau]

I predicted last week that the media write up of today's CBO 10 year deficit projection would forget to note what's not included in the 1/26's new CBO 10 yr forecast - Because of the "baseline rules" that CBO follows, the CBO projections leave out several trillion dollars in likely costs over the next 10 years. For example, the baseline will omit the costs of extending relief from the Alternative Minimum Tax for millions of households and the costs of continuing a number of tax breaks that are routinely renewed every few years. The CBO baseline also will not include the costs of extending the tax cuts enacted over the past three years.

And I see no discussion of the above in the early reports of the new forcast.

http://www.guardian.co.uk/uslatest/story/0,1282,-3670631,00.html

Hill Budget Office Sees $477B Deficit

Monday January 26, 2004 3:46 PM
By ALAN FRAM Associated Press Writer

WASHINGTON (AP) - The federal deficit will hit a record $477 billion this year and get worse if lawmakers cut taxes or increase spending, the Congressional Budget Office projected Monday in a report sure to become ammunition in the election-year fight over red ink.

In its annual wintertime economic outlook, lawmakers' nonpartisan fiscal analyst also estimated that the deficit would ease to $362 billion in 2005, according to numbers obtained by The Associated Press.

The budget office also estimated that deficits for the decade ending in 2013 would total nearly $2.4 trillion. The August report foresaw deficits totaling $1.4 trillion over 10 years. <snip>

The figures were similar to the budget office's last report as the added costs for the newly passed Medicare expansion were offset by higher revenue generated by the improving economy. In August, lawmakers' nonpartisan fiscal analyst envisioned shortfalls of $480 billion for this year and $341 billion for 2005. <snip>

Bush has so far revealed no details of how he would achieve that. Democrats say his goal would be a minimal accomplishment because deficits are so high to start with. They also say it is meant as a distraction from the even deeper deficits expected when baby boomers retire in force just beyond a decade from now. <snip>

[FreeperSlayer]

1. See, the tax cuts DID work!

Geez, all of the "chicken littles" running around saying that the deficit would hit $500,000,000,000! Thanks to the tax cuts and the great "Bush Boom", it's only $477,000,000,000.



BUSH OUT!!!!!

[papau]

2. Good News is that 477 is reduction: bad news is 10 year up 1T, up 8.5T

if the estimates by CBO of the likely GOP Congress moves on Alternative tax and growth of gov relative to GDP growth are factored in.

So last August's 10 year of $1.4 trillion deficit is now a 1/04 estimate of $2.4 trillion.

And in the small print you find out the $2.4 trillion does not include $7.5 trillion over 10 years of items that seem at least likely.

So in total WE ARE STILL UNDER $10 TRILLION INCREASE IN DEFICIT OVER 10 YEARS IF GOP WINS ELECTIONS!

Golly, do I feel lucky.

[papau]

12. CBO director on PBS says making 01 cuts permanent is 1.5T - is this

CBO director on PBS says making 01 cuts permanent is 1.5T - is this additional?

A 1.5 T number does not show up in the 9.9 T (2.4 base plus 7.5 likely) discussion.

Another lie?

[papau]

3. 10 yr $2.4 T if we ignore 7.5T likely -link to CBO release with some data

The CBO baseline does notinclude the costs of extending the tax cuts enacted over the past three years. Please note the 10 year totals of $7.475 trillion additional deficit for the items not in official base line estimate (Policy Alternatives That Increase the Deficit or Reduce the Surplusa- Extend Expiring Tax Provisions-Effect on the deficit or surplus-EGTRRA and JGTRRA -1,233-Partial expensing -440 Other -195 Total -1,868 -Debt service -363-Reform the Alternative Minimum Tax-Effect on the deficit or surplus -376-Debt service -93 -Increase Discretionary Appropriations by the Growth Rate of Nominal GDP After 2004 Effect on the deficit or surplus -1,360 -Debt service -258 -Increase Discretionary Appropriations by 6.9 Percent a Year After 2004 -Effect on the deficit or surplus -2,682 -Debt service -475 ... or $7.475 trillion in total additional deficit over 10 years)



http://www.cbo.gov/showdoc.cfm?index=4985&sequence=0



CBO projects discretionary spending as specified in the Balanced Budget and Emergency Deficit Control Act of 1985 (using the GDP deflator and the Employment Cost Index for wages and salaries). The combined rate of growth of those factors is about half of that projected for nominal GDP. As a result, the baseline projection for discretionary outlays falls from 7.8 percent of GDP in 2004 to 6.4 percent in 2014. If instead such spending kept pace with the growth of GDP (and the other assumptions incorporated in the baseline remained the same), discretionary outlays would maintain a share of about 7.8 percent of GDP throughout the projection period and the deficit in 2014 would be $323 billion, or 1.8 percent of GDP (compared with a small surplus for 2014 under the baseline's assumptions).(2) Revenues are projected to total 15.8 percent of GDP this year--about 2.5 percentage points below the average since 1962 (18.2 percent). As the economy continues to improve and certain tax provisions expire, revenues will increase to 16.9 percent of GDP in 2005, CBO projects. In 2006 through 2010, rising income and the expiration of more tax provisions will push revenues up to about 18 percent of GDP, by CBO's estimates. In the baseline, projected receipts rise more rapidly after the major provisions of EGTRRA expire at the end of 2010, reaching 20.1 percent of GDP in 2014. If those provisions--together with the expiring provisions of other tax laws--were instead extended and all of the other assumptions underlying the baseline were held constant, receipts would be 18.1 percent of GDP in 2014, and the deficit would total $443 billion, or 2.4 percent of GDP. Debt held by the public (the most meaningful measure of federal debt in terms of its relationship to the economy) is anticipated to equal 38 percent of GDP at the end of this fiscal year. Under CBO's baseline, that debt will stabilize at around 40 percent of GDP through 2011, at which point the federal government's diminished need to borrow will reduce the growth of such debt. Since CBO last issued its baseline (in the August 2003 Budget and Economic Outlook: An Update), the cumulative deficit over the 2004-2013 period has increased by nearly $1 trillion, or 0.7 percent of GDP (see Summary Table 2). About 70 percent of that total results from new legislation, such as the Medicare law. Another $171 billion stems from economic factors--mainly the decline in CBO's forecast for inflation, which reduces estimates of both revenues and outlays (although the effect on revenues is moderately larger). Changes in projections of the unemployment rate, real GDP, and other variables also play a role. Technical revisions to CBO's baseline--mostly on the revenue side of the budget--account for another $134 billion of the addition to the cumulative deficit over the 2004-2013 period.
CBO's forecast for the next two calendar years anticipates continued robust growth in overall demand. Stronger business investment will lead the way as firms spend more than they have spent in the past few years on their fixed assets (such as buildings and equipment) and switch from drawing down inventories to restocking their shelves. The rapid growth of productivity over the past three years has contributed to the economy's capacity to expand quickly without boosting inflation significantly. Indeed, the unexpected strength of productivity during 2003 has caused CBO to raise its expectation for potential GDP (the level of GDP consistent with a high rate of resource use) and, in turn, for GDP. CBO expects real GDP to expand by 4.8 percent in calendar year 2004 and 4.2 percent in 2005 and then to grow at an average annual rate of 2.7 percent from 2006 to 2014 (see Summary Table 3). Summary Table 3. CBO's Economic Projections for Calendar Years 2004 Through 2014 Estimated2003 Forecast ProjectedAnnual Average,2006-2014
2004 2005

Nominal GDP (Billions of dollars) 10,980 11,629 12,243 18,266a

Nominal GDP (Percentage change) 4.8 5.9 5.3 4.5

Real GDP (Percentage change) 3.2 4.8 4.2 2.7

GDP Price Index Percentage change) 1.6 1.1 1.1 1.8

Consumer Price Indexb (Percentage change) 2.3 1.6 1.7 2.2

Unemployment Rate (Percent) 6.0 5.8 5.3 5.2

Three-Month Treasury Bill Rate (Percent) 1.0 1.3 3.0 4.5

Ten-Year Treasury Note Rate (Percent) 4.0 4.6 5.4 5.5
Sources: Congressional Budget Office; Department of Commerce, Bureau of Economic Analysis; Department of Labor, Bureau of Labor Statistics; Federal Reserve Board. Note: Percentage changes are year over year. a. Level in 2014. b. The consumer price index for all urban consumers. The unemployment rate is forecast to fall from 6.0 percent in 2003 to 5.8 percent in 2004 and 5.3 percent in 2005, reflecting the expected closing of the gap between GDP and potential GDP. After briefly dipping to 5.0 percent in 2006, the unemployment rate will average 5.2 percent from 2007 through 2014, according to CBO's projections. In CBO's estimates, inflation and nominal interest rates will remain low by historical standards from 2004 to 2014, even though interest rates will rise from current levels. The consumer price index for all urban consumers (CPI-U) will fall from 2.3 percent in 2003 to 1.6 percent in 2004 and then gradually rise to average 2.2 percent from 2006 to 2014. Since its previous forecast in August, CBO has reduced the projected rate of CPI-U growth by 0.7 percentage points for 2005 and by about 0.3 percentage points annually beyond 2006. That outlook reflects CBO's view that the Federal Reserve will act to maintain the underlying rate of CPI-U inflation at between 2.0 percent and 2.5 percent, on average. The interest rate on three-month Treasury bills for calendar year 2003 was just 1.0 percent. The rate for such bills will remain very low for 2004, CBO anticipates, but will increase to 3.0 percent in 2005. By CBO's projections, the rate will reach 4.6 percent in 2007 and remain at that level through 2014. The yield on 10-year Treasury notes will rise from an average 4.0 percent in 2003 to 4.6 percent in 2004, 5.4 percent in 2005, and 5.5 percent from 2006 through 2014, CBO projects. (1) That estimate includes the increased interest payments on federal debt attributable to legislative changes.
(2) That projection includes an extrapolation of the $87 billion in supplemental appropriations for 2004 enacted in November 2003 to fund defense spending and reconstruction in Iraq and Afghanistan.

Declines in two major revenue sources--taxes on individual and corporate income--exceeded the overall drop on a percentage basis. Revenues from individual income taxes were almost 8 percent lower in 2003 than in 2002, and corporate income tax receipts were nearly 11 percent lower. Receipts from social insurance (payroll) taxes, by contrast, grew by almost 2 percent. Table 1-3.

The Budgetary Effects of Policy Alternatives Not Included in CBO's Baseline

(Billions of dollars)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total,2005-2009 Total,2005-2014

Policy Alternatives That Increase the Deficit or Reduce the Surplusa
Extend Expiring Tax Provisionsb
Effect on the deficit or surplus
EGTRRA and JGTRRA -1 -14 -32 -35 -34 -40 -48 -175 -275 -285 -295 -155 -1,233
Partial expensing 3 -41 -71 -66 -58 -48 -40 -33 -28 -26 -28 -285 -440
Other 3 -1 -7 -12 -17 -19 -23 -25 -28 -31 -33 -56 -195
Total 6 -56 -110 -113 -108 -108 -110 -233 -331 -341 -356 -496 -1,868
Debt service * -1 -5 -11 -17 -24 -31 -41 -57 -77 -99 -57 -363

Reform the Alternative Minimum Taxc
Effect on the deficit or surplus 0 -7 -21 -29 -39 -51 -62 -52 -31 -38 -45 -148 -376
Debt service 0 * -1 -2 -4 -7 -10 -13 -16 -19 -22 -14 -93

Increase Discretionary Appropriations by the Growth Rate of Nominal GDP After 2004
Effect on the deficit or surplus 0 -18 -44 -68 -93 -119 -147 -174 -202 -232 -264 -342 -1,360
Debt service 0 * -2 -5 -9 -15 -23 -32 -43 -57 -72 -31 -258

Increase Discretionary Appropriations by 6.9 Percent a Year After 2004d
Effect on the deficit or surplus 0 -25 -67 -114 -165 -219 -278 -343 -412 -488 -570 -590 -2,682
Debt service 0 * -3 -7 -15 -26 -40 -58 -80 -107 -139 -51 -475



CBO's Baseline Budget Outlook Actual2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total,2005-2009 Total,2005-2014

In Billions of Dollars

Total Revenues 1,782 1,817 2,049 2,256 2,385 2,506 2,644 2,786 3,036 3,272 3,441 3,629 11,840 28,004
Total Outlays 2,158 2,294 2,411 2,525 2,652 2,783 2,912 3,047 3,198 3,296 3,457 3,616 13,282 29,897
Total Deficit (-) or Surplus -375 -477 -362 -269 -267 -278 -268 -261 -162 -24 -16 13 -1,443 -1,893
On-Budget -536 -631 -535 -464 -477 -504 -507 -511 -421 -299 -294 -277 -2,487 -4,288
Off-Budgeta 161 154 174 195 211 226 239 249 259 275 278 290 1,045 2,395

[papau]

13. CBO director on PBS says making 01 cuts permanent is 1.5T - is this

CBO director on PBS says making 01 cuts permanent is 1.5T - is this additional?

A 1.5 T number does not show up in the 9.9 T (2.4 base plus 7.5 likely) discussion.

Another lie?

[papau]

14. Krugman says tax cuts caused deficit

Krugman thinks anew that the Bush tax cuts caused the record deficit


http://www.nytimes.com/2004/01/27/opinion/27KRUG.html

<snip> The main reason for deficits, however, is that revenues have plunged. Federal tax receipts as a share of national income are now at their lowest level since 1950.Of course, most people don't feel that their taxes have fallen sharply. And they're right: taxes that fall mainly on middle-income Americans, like the payroll tax, are still near historic highs. The decline in revenue has come almost entirely from taxes that are mostly paid by the richest 5 percent of families: the personal income tax and the corporate profits tax. These taxes combined now take a smaller share of national income than in any year since World War II.

This decline in tax collections from the wealthy is partly the result of the Bush tax cuts, which account for more than half of this year's projected deficit. But it also probably reflects an epidemic of tax avoidance and evasion. Everyone who wants to understand what's happening to the tax system should read "Perfectly Legal," the new book by David Cay Johnston, The Times's tax reporter, who shows how ideologues have made America safe for wealthy people who don't feel like paying taxes.

I was particularly struck by Mr. Johnston's description of the carefully staged Senate Finance Committee hearings in 1997-1998. Senators Trent Lott and Frank Murkowski accused the I.R.S. of "Gestapo"-like tactics, and Congress passed new rules that severely restricted the I.R.S.'s ability to investigate suspected tax evaders. Only later, when the cameras were no longer rolling, did it become clear that the whole thing was a con. Most of the charges weren't true, and there was good reason to believe that the star witness, who dramatically described how I.R.S. agents had humiliated him, really was engaged in major-league tax evasion (he eventually paid $23 million, insisting he had done no wrong).<snip>


So the right has used deceptive salesmanship to undermine tax enforcement and push through upper-income tax cuts. And now that deficits have emerged, the right insists that they are the result of runaway spending, which must be curbed. <snip>

[mbperrin]

4. Hey, why worry? Can't we just

charge it?

</total disconnect with reality>

[OldCurmudgeon]

5. eavesdropping on Bush call to Greenspan:

"what do you mean we're running out of money. My checkbook still has checks!"

[denverbill]

6. Since deficits don't matter anymore, how about National Health Care?

After all, it will cost only marginally more than what we have now. If it adds another $100 billion/year to the deficit, it would be money WELL spent.

Yeah!!!! Deficits don't matter anymore!!!! Let's cut all taxes to zero and party, party, party!!!!

[papau]

7. Financial Media doesn't note real deficit is 631 before theft from SS

payroll tax surplus.

But what the heck - as you say -

the GOP right wing media whores just want to party!

[UpInArms]

8. related article

http://money.cnn.com/2004/01/26/news/economy/election_budget/

The amazing disappearing budget
Bush's 2005 plan will pledge to halve the deficit by 2009 -- but that could be an illusion.

In his State of the Union speech last week and in other public appearances, President Bush and members of his administration have promised to cut that deficit in half by 2009. Though Bush has pledged to keep spending in check, he hasn't offered specifics for cutting the deficit, and -- according to some analysts -- what plans he has proposed seem more likely to grow the deficit, including:

making tax cuts permanent
privatizing Social Security
establishing a permanent base on the moon, followed by manned missions to Mars
tax credits for health insurance
worker training programs
prisoner rehabilitation programs

"With all these new programs, the administration's contention that the deficit will be cut in half in the next five years is a tall tale, derived in large part by omitting very likely or inevitable costs, including costs for proposals the administration itself hopes and intends to support," Keith Ashdown, spokesman for Taxpayers for Common Sense, a Washington watchdog group, wrote recently.

...more...

[ElsewheresDaughter]

9. what one BILLION is...it is hard to grasp but this can help.....

1 billion seconds ago it was 1958
1 billion minutes ago Jesus walked the earth
1 billion hours ago man was living in caves

now multiply

[papau]

10. CBO used 4.8% growth next year - and still got these numbers -and * cuts

CBO used 4.8% growth next year - and still got these numbers -and * cuts are unreal - so minimal they do not pass laugh test.

Bush has - for this election year -promised an effective freeze on federal discretionary spending not connected to defense or homeland security, calling that the foundation of a push to halve the deficit over five years.

Congressional and private-sector budget analysts, however, note the move would save the government only around $8 billion dollars out of a $2 trillion-plus federal budget -- even if Congress can be made to swallow the cuts it would require.

And all this despite assumptions of economic growth of 4.8 percent this year and 4.2 percent in 2005

[papau]

15. Krugman says tax cut caused deficits

Krugman thinks anew that the Bush tax cuts caused the record deficit


http://www.nytimes.com/2004/01/27/opinion/27KRUG.html

<snip> The main reason for deficits, however, is that revenues have plunged. Federal tax receipts as a share of national income are now at their lowest level since 1950.Of course, most people don't feel that their taxes have fallen sharply. And they're right: taxes that fall mainly on middle-income Americans, like the payroll tax, are still near historic highs. The decline in revenue has come almost entirely from taxes that are mostly paid by the richest 5 percent of families: the personal income tax and the corporate profits tax. These taxes combined now take a smaller share of national income than in any year since World War II.

This decline in tax collections from the wealthy is partly the result of the Bush tax cuts, which account for more than half of this year's projected deficit. But it also probably reflects an epidemic of tax avoidance and evasion. Everyone who wants to understand what's happening to the tax system should read "Perfectly Legal," the new book by David Cay Johnston, The Times's tax reporter, who shows how ideologues have made America safe for wealthy people who don't feel like paying taxes.

I was particularly struck by Mr. Johnston's description of the carefully staged Senate Finance Committee hearings in 1997-1998. Senators Trent Lott and Frank Murkowski accused the I.R.S. of "Gestapo"-like tactics, and Congress passed new rules that severely restricted the I.R.S.'s ability to investigate suspected tax evaders. Only later, when the cameras were no longer rolling, did it become clear that the whole thing was a con. Most of the charges weren't true, and there was good reason to believe that the star witness, who dramatically described how I.R.S. agents had humiliated him, really was engaged in major-league tax evasion (he eventually paid $23 million, insisting he had done no wrong).<snip>


So the right has used deceptive salesmanship to undermine tax enforcement and push through upper-income tax cuts. And now that deficits have emerged, the right insists that they are the result of runaway spending, which must be curbed. <snip>

[indepat]

11. We haven't seen anything yet: yet Bush, they say, is not to blame for

anything bad (but will surely take credit for anything good?). Surely the size of these deficits are but a precursor of what's to come.

[dolstein]

16. The real figures (exclusing SS surplus) are much higher

NT