More U.S. Austerity Needed… CBO Baseline Shows Huge Deficits at $1.1 Trillion in 2012

The Congressional Budget Office is out with its outlook and deficits are expected to continue.  This report is released each January and the goal is not to be political from this body but to find what is a baseline case on the budget expectations for a decade out. Here are some of the findings:

• CBO projects a $1.1 trillion federal budget deficit for fiscal year 2012 if current laws remain unchanged.
• As a share of the U.S. output measured by Gross Domestic Product that shortfall of 7.0 percent is nearly 2 percentage points below the deficit recorded in 2011.  It is still higher than what was reported of any deficit between 1947 and 2008.
• Over the next few years, projected deficits in CBO’s baseline decline markedly, dropping to under $200 billion and averaging 1.5 percent of GDP over the 2013–2022 period.

Here is the CBO’s out and caveat: “But substantial changes to tax and spending policies are slated to take effect within the next year under current law. So CBO has also prepared projections under an “alternative fiscal scenario,” in which some current or recent policies are assumed to continue in effect, even though, by law, they are scheduled to change. The decisions made by lawmakers as they confront those policy choices will have a significant impact on budget outcomes in the coming years.”

It is pretty sad that when you take the top earners and consider that taxing them at 100% it would not fix the problem.  Some revenue enhancements will be needed in time regardless of the political bantering today, but there are two key things that ultimately need to be addressed: growth needs to rise, and government spending needs to be brought way down.

There is an a 29-slide show that can be accessed on the CBO blog showing more of this broken down.

JON C. OGG