14 Trillion Deficit?
With all the “new” figures out there concerning deficit and debt numbers, plus the old, it’s rather confusing as to which can be believed. Greg Mankiw cites the Concord Coalition who makes the case that perhaps neither the CBO or the White House have their finger on the real deficit numbers:
The Concord Baseline makes some key assumption changes to the CBO baseline. CBO is required to assume that congressional appropriations continue increasing only at the rate of inflation for the 10 year baseline. They also extend emergency supplemental at their “current” level plus inflation over the duration of the baseline. For tax legislation, they assume current law will govern–so if there are tax cuts that have sunsets (as the 2001 and 2003 tax cuts have), CBO is required to project revenues assuming the tax cuts expire as written in the legislation. They also project economic growth in a very conservative fashion–they do not try to anticipate major changes in the economy, either recessions or accelerations.
The Concord Coalition takes the CBO baseline and adjusts it to assume appropriations increase at the same rate as the economy (GDP growth). This increase is closer to the historical average rate of increase. We also assume that supplemental appropriations do not continue indefinitely. For recent appropriations for the wars in Iraq and Afghanistan, we include realistic estimates from CBO about how much will be spent under a scenario where troop levels slowly decrease to about one-third of their level at the time of the estimate. For taxes, we assume that all of the major tax cuts will be extended beyond 2010. We also assume the one-year patches to the Alternative Minimum Tax will continue to be enacted, holding the level of taxpayers hit by the tax roughly constant throughout the baseline period. Finally, we include a calculation for the increased debt service (interest payments) that these policies would cause by their increasing the deficit. We do not make any changes to CBO’s economic assumptions.
With those seemingly more complete assumptions and numbers, the Coalition finds that we’re most likely looking at much higher deficits over the next 10 years than either CBO or OMB are projecting:
As you can see, the Concord Coalition believes their projections to come from a more “plausible” set of baseline assumptions than either CBO and OMB. If so, and reading the description above, I see nothing that is implausible in their assumptions, we’re seeing the deficits understated by almost half.
Another in a long line of reasons not to be enacting any new and huge entitlement or cap-and-trade. In fact, the business of Congress right now should be a long and detailed look at how it can cut entitlement spending and scale back government.
But they’re not. Instead they’re busily engaged in expanding multi-generational taxation without representation. Didn’t we once fight a revolution over that?
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