February 24, 2008
The $4 Trillion Headache and What the Government Isn’t Doing about It.
Have you noticed how the Congressional Budget Office (CBO) so often predicts near term federal deficits to be followed by surpluses beyond the current or even the next presidential term? Have you also noticed that those surpluses almost never arrive? And have you noticed that, when the forecasted federal fiscal boom fails to materialize, the CBO releases yet another forecast of near term deficits followed by surpluses, scheduled to appear after what is now the current or even the next presidential term?
Well, those folks are at it again. CNNMoney reports:
“According to the Congressional Budget Office (CBO), the annual budget deficit will improve during the next president’s four-year term and end in a surplus of $61 billion by 2013.”
That’s right. The surplus will arrive not during the current or next presidential administration, but during the term after the next.
Unfortunately,
…baseline projection is based on financial assumptions that no one expects to pan out. Two of the biggest roadblocks threatening to upend budgetary nirvana: What to do about the looming expiration of tax cuts enacted in 2001 and 2003, and the growing cost of fixing – or nixing – the Alternative Minimum Tax (AMT).Depending on how you address them, those two factors alone could add close to $4 trillion to the federal budget deficit by 2018, according to estimates by the Tax Policy Center.
Add in the costs of the wars in Iraq and Afghanistan and the growing costs of Medicare and Social Security, and you end up with something more like a budgetary nadir.
As pointed out in that last sentence, the forecast fails to consider the effects of committed transfer programs — the ones that will slam us over the coming decades with the retirement of the Baby Boomers and the aging of our society.
Unfortunately, the two major political parties are sticking with their standard approaches — the Democrats continue to call for new programs and the Republicans further cultivate their visceral aversion to taxes.
The last line of the CNN article sums up matters well:
The political friction over which route to take will play a big part in shaping the next president’s initiatives. Gordon of the Concord Coalition said it’s not hard to find ways to balance the budget mathematically. But, he said, “it’s hard politically.”
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