The Congressional Budget Office has released its updated 10-year budget and economic forecast. Actually, the CBO offers two forecasts. It has a baseline forecast, which assumes current law stays in place. It also has an “alternative” forecast which assumes current tax and spending policy stays in place as is—even if the law says it must change in coming years. That scenario incorporates the following assumptions:
– Expiring tax provisions (other than the payroll tax reduction) are extended [under current law, those expirations will boost individual income taxes in a variety of ways by amounts totaling $3.8 trillion from 2013 through 2022];
– The AMT is indexed for inflation after 2011 [under current law, its parameters are fixed, and the number of taxpayers affected by the AMT will jump from 4 million in calendar year 2011 to 30 million in 2012];
– Medicare’s payment rates for physicians’ services are held constant at their current level [under current law, those rates are scheduled to drop by 27 percent this March and more in later years]; and
– The automatic spending reductions required by the Budget Control Act do not take effect [under current law, they will impose reductions totaling about $109 billion a year starting in January 2013].
I like to refer to the “alternative fiscal scenario” as the “realistic fiscal scenario.” It is certainly the scarier scenario over the long term. For instance, annual budget deficits would average 5.4 percent of GDP over the 2013–2022 period under the alternative fiscal scenario, rather than the 1.5 percent reflected in CBO’s baseline projections. (In other words, instead of adding $3 trillion in new debt over the next decade, Washington would add $11 trillion.) Debt held by the public would climb to 94 percent of GDP in 2022, the highest figure since just after World War II.
With that background, here are some of the scariest debt and economic charts I pulled out of the CBO report:
1. Huge deficits as far as the eye can see
2. Total debt held by the public reaches its highest level since just after World War II
3. The economy continues to perform below its potential for years, leaving the economy smaller than it would be otherwise
4. The unemployment rate stays at abnormally high levels for years
5. Spending never returns to its pre-Obama levels