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9.24.04
Politics and Economy:
Debating the Deficit
More on This Story:
Overview

The nonpartisan Congressional Budget Office (CBO) has estimated that debt will climb by $2.3 trillion over the next 10 years, and that making all Mr. Bush's tax cuts permanent would cost an additional $1.9 trillion by the end of 2014. In April, the CBO raised its estimate of the 2004 budget deficit to 477 billion dollars, up from 307 billion dollars a year ago. THE WASHINGTON POST reported on April 13, 2004, using the federal government's own figures, that the federal government now pays five times as much in interest on the deficit as it spends on the environment and natural resources. The numbers are so high that traditional fiscal conservatives are battling with others in their party about the President's 2005 spending plans. Pete Peterson the author of RUNNING ON EMPTY: HOW THE DEMOCRATIC AND REPUBLICAN PARTIES ARE BANKRUPTING OUR FUTURE AND WHAT AMERICANS CAN DO ABOUT IT talks with David Brancaccioi on September 24, 2004. You can find an estimate of each debt per citizen at the U.S. Debt Clock.

Alice M. Rivlin and Isabel Sawhill of the Brookings Institute have come out with RESTORING FISCAL SANITY: BALANCING THE BUDGET, which offers three different ways of dealing with the current deficit situation: a "Better Government Plan," "Larger Government Plan," and "Smaller Government Plan." Budget deficits, they argue, are bad for the economy in multiple ways: they slow economic growth; they increase household borrowing costs; they increase indebtedness to foreigners; they require a larger and larger proportion of revenues be devoted to paying debt interest; they impose enormous burdens on future generations. Indeed, the dollar is at an all-time low compared to foreign currencies like the Euro, in the eyes of many analysts this is due to concerns about the federal deficit.

Rivlin and Sawhill acknowledge that dealing with the deficit won't be pretty — any solution involves "painful and politically difficult choices." Rivlin and Sawhill also contend that future deficits are likely much higher than those projected by the White House or the Congressional Budget Office (CBO). That is because the CBO must assume the current law will remain unchanged. The adjusted numbers from the Brookings report assume that the tax cut legislation of 2001, 2002, and 2003 will be made permanent as requested by the White House, instead of expiring in ten years as is now the case. The adjusted figures also assume that discretionary spending increasea with population growth and with inflation and add the costs of recent changes to the Medicare law. Below are the CBO and Rivlin and Sawhill's projections for deficits through 2014, and historical information on U.S. deficits and government spending as a proportion of Gross Domestic Product.

Projected Deficits to 2014 (in billions of dollars)


2004 Congressional Budget Office Projection:
2004 Adjusted Deficit Projection:
 -480
 -491
2005 Congressional Budget Office Projection:
2005 Adjusted Deficit Projection:
 -341
 -435
2006 Congressional Budget Office Projection:
2006 Adjusted Deficit Projection:
 -225
 -430
2007 Congressional Budget Office Projection:
2007 Adjusted Deficit Projection:
 -203
 -449
2008 Congressional Budget Office Projection:
2008 Adjusted Deficit Projection:
 -197
 -479
2009 Congressional Budget Office Projection:
2009 Adjusted Deficit Projection:
 -169
 -499
2010 Congressional Budget Office Projection:
2010 Adjusted Deficit Projection:
 -145
 -521
2011 Congressional Budget Office Projection:
2011 Adjusted Deficit Projection:
 -9
 -576
2012 Congressional Budget Office Projection:
2012 Adjusted Deficit Projection:
 +160
 -581
2013 Congressional Budget Office Projection:
2013 Adjusted Deficit Projection:
 +211
 -626
2014 Congressional Budget Office Projection:
2014 Adjusted Deficit Projection:
 +251
 -687
Sources: Congressional Budget Office Current Budget Projections, RESTORING FISCAL SANITY: BALANCING THE BUDGET

Historical Budget Deficits and Surpluses

1970: Deficit in millions of Dollars:  -2,842
1975: Deficit in millions of Dollars:  -53,242
1980: Deficit in millions of Dollars:  -73,830
1985: Deficit in millions of Dollars:  -212,308
1990: Deficit in millions of Dollars:  -221,195
1995: Deficit in millions of Dollars:  -163,972
2000: Surplus in millions of Dollars:  236,445
2003: Deficit in millions of Dollars:  -375,000
2004 (projected): Deficit in millions of Dollars:  -477,000
Sources: Congressional Budget Office Current Budget Projections, March 8, 2004; U.S. Department of Treasury, Department of Accounting and Budget; Office of Management and Budget, Budget of the United States Government, Fiscal Year 2004; Bureau of the Public Debt, The Public Debt To the Penny


Government Spending in Current Dollars


1970: Spending in billions of dollars:
Spending as percent of GDP:
 195.6
 19.3%
1975: Spending in billions of dollars:
Spending as percent of GDP:
 332.3
 21.3%
1980: Spending in billions of dollars:
Spending as percent of GDP:
 590.8
 21.6%
1985: Spending in billions of dollars:
Spending as percent of GDP:
 946.4
 22.9%
1990: Spending in billions of dollars:
Spending as percent of GDP:
 1,253,2
 21.8%
1995: Spending in billions of dollars:
Spending as percent of GDP:
 1,515.8
 20.7%
2000: Spending in billions of dollars:
Spending as percent of GDP:
 1,788.8
 18.4%
2004 (projected): Spending in billions of dollars:
Spending as percent of GDP:
 2,295
 20.0%
Sources: Congressional Budget Office Current Budget Projections, March 8, 2004; U.S. Department of Treasury, Department of Accounting and Budget; Office of Management and Budget, "Budget of the United States Government, Fiscal Year 2004;"

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