Summary of current law and current policy scenarios
June 15, 2012
Percentage of GDP
SOURCE: Data from the Congressional Budget Office, The 2012 Long-Term Budget Outlook, June 2012.Compiled by PGPF.
CBO prepares two long-term projections of the budget. The first assumes a continuation of current laws which will dramatically increase revenues and sharply reduce spending. Under this scenario, a number of tax policies that have repeatedly been extended by policymakers will be allowed to expire at the end of 2012, large number of Americans will be subject to the Alternative Minimum Tax, physician payment rates under Medicare will be reduced by 30 percent, and other federal spending will be reduced beneath its 40-year low as a share of the economy. This scenario puts the budget on a sustainable path over the long term but it would impose sharp changes in the short run — so sharp, in fact, that CBO forecasts that it would push the economy back into recession next year. Because this scenario includes policy changes that Congress frequently overrides, CBO also prepares a long-term scenario that assumes a continuation of current policies. For instance, this scenario assumes that the tax cuts will be extended and that some of the spending cuts will be waived as policymakers have done in the past. Under that current-policy scenario, debt will grow to unprecedented and unsustainable levels.
This chart appeared as part of PGPF's analysis of Congressional Budget Office's 2012 Long-Term Budget Outlook. To read the full report, click here.
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