The Congressional Budget Office updates its Economic and Budget Outlook. I haven't yet had a chance to go through it, however: it's the first week of the semester, and there are too many other heavy claims on my time.
Posted by DeLong at August 27, 2002 01:54 PM | TrackbackThe Budget and Economic Outlook: An Update: The budget deficit expected for this year has grown and the surpluses anticipated for the coming decade have diminished under the Congressional Budget Office's (CBO's) new baseline projections. A sharp decline in tax revenues coupled with double-digit growth in spending will produce a deficit of about $157 billion in fiscal year 2002, CBO estimates. If current tax and spending policies are maintained, deficits are likely to persist for a few years before giving way to small surpluses. Between 2003 and 2009, those annual deficits and surpluses would generally equal less than 1 percent of the nation's gross domestic product (GDP) and roughly balance out. For the 10-year period from 2003 through 2012, CBO's baseline projects a total surplus of $1.0 trillion.
The CBO says: "For the 10-year period from 2003 through 2012, CBO's baseline projects a total surplus of $1.0 trillion."
Doesn't the CBO have to assume current tax law in its estimates? If so, how much of that 1.0 trillion comes from the higher taxes when the Bush tax cut expires in 2010 (I think, anyway before 2012)?
Posted by: David Margolies on August 27, 2002 02:53 PMAbout $412 billion is 'gained' by the expiring provisions of the 2001 tax cut (most due to the expirations in 2011 and 2012, about $70b for stuff that starts expiring before 2011. Then there's the cost of provisions that start expiring in the interim, 2003-2010.
In addition, there's another $140b of tax provisions that are always set to 'expire' and always get renewed.
Now I'm going to expire.
Total cost, assuming nothing actually expires, is a reduction in surplus/increase in deficit of $693 billion for 2003-2012.
Yeah. You're right. CBO has to, by law, report the ten-year number. But (unless you believe EGTRRA or whatever it's called actually is going to expire at the end of this decade) the ten-year deficit number is not an informative one.
Posted by: Brad DeLong on August 28, 2002 07:31 AMCBO estimates can not account for government spending increases that are in line with either population or GDP growth. Reasonable estimates then should add 1.1 trillion dollars to spending according to Paul Krugman.
Posted by: on August 28, 2002 11:04 AM