The President's policies would produce annual deficits that are higher than the CBO baseline but lower than CBO's alternative fiscal scenario
March 16, 2012
SOURCE: Data from the Congressional Budget Office, An Analysis of the President's 2013 Budget, March 2012; and the Congressional Budget Office, Updated Budget Projections: Fiscal Years 2012 to 2022, March 2012. Compiled by PGPF.
In its March 2012 analysis, CBO projects that as the economy recovers, deficits under the President’s budget proposals would decline for the first part of the decade, and then, after 5 years of improvement, begin to rise again, reaching 3 percent of GDP in 2022.
The above chart puts these policies in context relative to two “baseline” scenarios that the Congressional Budget Office (CBO) publishes. The current law baseline, in blue, assumes that several popular policies — including the 2001/2003/2009 individual income tax cuts — would expire as scheduled and that discretionary spending would fall to historically low levels. Relative to this baseline, the President’s budget increases ten-year deficits by $3.5 trillion, averaging 1.8 percent of GDP. Because lawmakers are generally expected to reject such significant changes, however, CBO provides an alternative scenario that assumes that many current policies continue. Relative to the baseline of the alternative fiscal scenario, the President’s budget reduces ten-year deficits by $4.3 trillion, averaging 2.1 percent of GDP. However, beyond 2022, the President’s budget reveals that deficit and debt climb to unsustainable levels due to a combination of an aging population and the growth in health care costs. That is why it is important to look beyond the 10-year window to understand the impact of proposed budget policies.
This chart appeared as a part of PGPF's analysis of the March 2012 report by the Congressional Budget Office, An Analysis of the President's 2013 Budget. To read the full report, click here.
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