Congressional Budget Office

2010 budget deficit slightly lower than expected

There is good news and bad news. First, the good news is that the budget deficit is lower than projected. The bad news? It’s still well over a trillion dollars:

Basic government spending rose by 9 percent in fiscal 2010, driving the country to a $1.291 trillion deficit down $125 billion from 2009, but still the second-largest hole on record, the Congressional Budget Office said Thursday.

CBO said the 9 percent rise in spending for defense, social programs, entitlements and interest on the debt was “somewhat faster than in recent years” a stark evaluation at a time when President Obama and Congress are working to convince voters they are pursuing a fiscally frugal course in Washington.

Still, the nearly $1.3 trillion deficit for fiscal 2010, which ended Sept. 30, is lower than prior projections, thanks in large part to expiring tax breaks, higher corporate tax receipts and the winding-down of the Troubled Asset Relief Program and payments to Fannie Mae and Freddie Mac.

You can read notes on the year end estimate from the Congressional Budget Office over at Doug Elmendorf’s blog.

For those of you keeping score at home, the projected deficit over the next 10 years, 2011 to 2020, is $6.2 trillion. Total debt as a percentage of GDP is expected to reach 100% by 2020.

Fiscal realities of ObamaCare

Over at Investors Business Daily, Douglas Holtz-Eakin, a former head of the Congressional Budget Office, and Paul Howard warn that ObamaCare could bring us back to where we just left…in another financial crisis:

Layering a new entitlement program with essentially unknown costs on top of the two programs that are already draining the federal Treasury — Medicare and Social Security — is the height of legislative irresponsibility. ObamaCare also reached a new low in Washington’s perennial budget games.

The $138 billion in estimated first-decade savings is illusory. It includes $53 billion in Social Security revenue that should go to that program, and $70 billion in premiums for a new federal long-term care program.

Counting these as health care “savings” merely generates a deficit somewhere else.

Program costs to get ObamaCare up and running — which aren’t appropriated in the bill — could easily add $110 billion or more in additional spending and wipe out any remaining savings. Democrats are also desperately trying to double-count $500 billion in Medicare cuts in ObamaCare as both shoring up Medicare’s long-term finances and funding a new entitlement program.

The CBO has ruled that it can only do one — not both. After ObamaCare becomes law, Democrats are expected to vote on a “doc fix” for increasing Medicare physician payments that will add another $371 billion to the price of health care reform.

When the $500 billion in Medicare cuts are added into the mix (remember, they can’t be counted twice) deficit costs in the first 10 years alone could easily approach $900 billion. The president and Democrats in Congress, of course, promise to get spending under control later, perhaps through a bipartisan commission.

CBO stimulus report is not news

The Congressional Budget Office released a report yesterday that our liberal friends are touting as proof the stimulus bill created jobs. But as Peter Suderman notes over at Reason, it’s nothing new:

Once again, the Congressional Budget Office reruns the same models that it used to estimate that the stimulus would create jobs and finds that, to the surprise of no one, that the model still says that the stimulus creates jobs. Hooray for the stimulus! Nevermind that the CBO’s director has confirmed that these reports do not serve as independent checks on the real-world effects of the spending, it’s news!

Over at The Atlantic, Megam McArdle agrees with Suderman:

The CBO has another report out on ARRA.  Every few months, this comes out, and every few months, a bunch of commentators treat this as if this were an empirical analysis, rather than a case of the CBO sticking the numbers back into the same model, re-running them, and conclusively proving that … their model still generates the same results.

As the editoral board of the Wall Street Journal opined last month while slamming the stimulus bill:

Baseline spending jumps by $4.4 trillion

The Wall Street Journal reports that baseline spending estimates, which the Congressional Budget Office uses in reports to Congress, has jumped by a staggering $4.4 trillion over the next ten years:

To appreciate the magnitude of this spending blowout, compare CBO’s budget “baseline” estimate in January 2008 with the baseline it released Thursday. The baseline predicts future spending based on the law at the time. As the nearby chart shows, in a mere 31 months Congress has added more than $4.4 trillion to the 10-year spending baseline. The 2008 and 2009 numbers are actual spending, the others are estimates. As recently as 2005, total federal spending was only $2.47 trillion.

Keep that $4.4 trillion in mind the next time you hear Mr. Obama or Speaker Nancy Pelosi say they “inherited” this budget mess. Let’s assume the recession that Mr. Obama inherited—Mrs. Pelosi was already in power—was responsible for causing $1 trillion or so in deficit spending. That still doesn’t explain why the annual deficit of roughly $1.4 trillion will be nearly as high in fiscal 2010, after a year of economic growth, as it was in 2009. Or why CBO says the deficit will still be nearly $1.1 trillion in 2011 even if all of the Bush-era tax cuts are repealed.

The deficit is barely declining because of the lackluster economic recovery, which continues to yield too little revenue, and especially because of the record levels of spending passed by the Democratic Congress and eagerly signed by Mr. Obama.

The national debt stands at $13.3 trillion and there are $50+ trillion in unfunded liabilities in Medicare and Social Security. Yet, Congress continues to spend under the tried and failed Keynesian belief that they can spend like drunken sailors and not face consequences for it.p

CBO report is bad news for Democrats

Yesterday, the Congressional Budget Office released a new report on the budget and economic outlook:

The warning from the non-partisan Congressional Budget Office came on top of more bad U.S. economic data that heightened concerns about a return to recession, roiling markets. The gloomy outlook could also spell trouble for Democrats facing November congressional elections.

The CBO forecast the U.S. budget deficit will hit $1.342 trillion this year, down slightly from its March projection of $1.368 trillion.
[…]
Congressional Budget Office Director Douglas Elmendorf said the economy faces a tough recovery from recession, although the CBO predicted 3 percent economic growth this year.

“The considerable number of vacant houses and underused factories and offices will be a continuing drag on residential construction and business investment, and slow income growth as well as lost wealth will restrain consumer spending,” he said.

The unemployment rate, currently at 9.5 percent, will not fall to around 5 percent until 2014, Elmendorf said. The last time the jobless rate was 5 percent was April 2008, just as the economy was entering recession. Economists generally view a 4 percent target jobless rate as a benchmark of full employment.

The report, which banks on the expiration of the Bush tax cuts expiring, shows budget deficits totalling $6.2 trillion between 2011 and 2020. However, the CBO also doesn’t show reason to give us much confidence in these numbers:

Those projections, which are similar in many respects to the ones that CBO prepared in March, reflect assumptions about spending and revenues that may significantly underestimate actual deficits.

Europe giving U.S. a glimpse of fiscal future

The Congressional Budget Office is warning that unless we get debt under control, we may wind up like other countries that have buckled under during a fiscal crisis:

The risk of a debt crisis along the lines of the kind being experienced in Europe will increase as long as the debt increases, the Congressional Budget Office (CBO) said Tuesday.

The CBO said in a new report that while it was impossible to predict whether the United States would encounter a debt crisis like those plaguing some European nations, the longer debts and deficits go unaddressed, the greater the risk of a crisis.

“Unfortunately, there is no way to predict with any confidence whether and when such a crisis might occur in the United States; in particular, there is no identifiable tipping point of debt relative to GDP indicating that a crisis is likely or imminent.” a new CBO report said. “But all else being equal, the higher the debt, the greater the risk of such a crisis.”

It’s not only our debt that represents a problem, but entitlement spending has to be address. Laurence Kotlikoff notes this problem in a column at the Financial Times:

Expect another record budget deficit this year

A couple of weeks ago, I noted that the budget deficit for FY 2010 had topped $1 trillion, this would be the second straight year with a trilion dollars in red ink. On Friday, the White House announced that it expects the budget deficit to reach a record $1.47 trillion before it’s all said and done:

New estimates from the White House on Friday predict the budget deficit will reach a record $1.47 trillion this year. The government is borrowing 41 cents of every dollar it spends.

That’s actually a little better than the administration predicted in February.

The new estimates paint a grim unemployment picture as the economy experiences a relatively jobless recovery. The unemployment rate, presently averaging 9.5 percent, would average 9 percent next year under the new estimates.

The deficit for FY 2011, next year, is expected to be around $1.4 trillion. Obama wasn’t kidding when he said we’d have trillion deficits as far as the eye can see.

But wasn’t ObamaCare supposed to help bring down the budget deficit? That was part of the reasoning, right? Well, thoses “savings” are not all they’re cracked up to be:

Budget deficit tops $1 trillion for fiscal year

Just a week after the United States recorded the third largest increase in the national debt for a single day, the CBO is reporting that the budget deficit for FY 2010 has topped $1 trillion:

The deficit was $1.005 trillion at the end of June for fiscal year 2010, which is $81 billion less than it was after nine months of fiscal 2009, according to a Congressional Budget Office (CBO) report released late Wednesday.

Tax revenues, due to improved corporate tax receipts, are slightly up while spending is slightly down compared to last year.

If that trend holds, the 2010 deficit would be slightly lower than last year’s $1.4 trillion budget shortfall, a record in nominal dollars, and lower than CBO’s earlier 2010 deficit projection of $1.5 trillion.

The CBO put out a report in March showing that President Barack Obama’s budgets would add $9.8 trillion to the national debt over the next 10 years. So, you know, get used to this.

CBO report highlights spending addiction

A new report from the Congressional Budget Office shows that the national debt is something that Congress may want to start paying attention to:

The national debt will reach 62 percent of gross domestic product (GDP) by the end of this year, the nonpartisan Congressional Budget Office (CBO) said Wednesday.

The budget office said the debt will reach its highest percentage of GDP since the end of World War II. The jump is driven by lower tax revenues and higher federal spending in the recent recession.

And while the national debt would stabilize at 67 percent of GDP over the next decade if current law were maintained, extending tax cuts enacted during the administration of President George W. Bush and keeping growth in appropriations in line with inflation would mean that the debt would reach almost 90 percent of GDP by 2020.

By contrast, GDP has averaged “a little above” 36 percent per year over the past 40 years.

Doug Elmendorf, the head of the CBO, writes

:

Have health insurance through your employer? You may not much longer

Does ObamaCare encourage employers to end offering health insurance benefits to employees in favor of the fines levied against them for offering no coverage at all? John C. Goodman thinks so:

AT&T, Caterpillar, John Deere and Verizon have all made internal calculations, according the House Energy and Commerce Committee, to determine how much could be saved by a) dropping their employer-provided insurance, b) paying a fine of $2,000 per employee, and c) leaving their employees with the option of buying highly-subsidized insurance in the newly created health-insurance exchange.

AT&T, for example, paid $2.4 billion last year to cover medical costs for its 283,000 active employees. If the company dropped its health plan and paid an annual penalty for each uninsured worker, the fines would total almost $600 million. But that would leave AT&T with a tidy profit of $1.8 billion.

Economists say employee benefits ultimately substitute for cash wages, which means that AT&T employees would get higher take-home pay. But considering that they will be required by federal law to buy their own insurance in an exchange, will they be net winners or losers? That depends on their incomes.

A Congressional Budget Office (CBO) analysis of the House version of ObamaCare, which is close to what actually passed in March, assumed a $15,000 premium for family coverage in 2016. Yet the only subsidy available for employer-provided coverage is the same one as under current law: the ability to pay with pretax dollars. For a $30,000-a-year worker paying no federal income tax, the only tax subsidy is the payroll tax avoided on the employer’s premiums. That subsidy is only worth about $2,811 a year.


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