Thought Theater

Deficit To Grow By 1.76 Trillion In Next Decade genre: Econ-Recon & Polispeak & Six Degrees of Speculation

The Congressional Budget Office reports an expected deficit of 1.76 trillion dollars over the next decade...but that assumes that the President's tax cuts will not be made permanent. If those tax cuts were to be extended permanently, the deficit would grow by more than twice that amount. Read the full Associated Press article here.

The $260 billion deficit forecast for the current budget year, which ends Sept. 30, is $112 billion below the office's last estimate, in March.

But the CBO forecast the improvement as short-lived, projecting the gap between revenues and spending will rise to $286 billion in 2007 and total $1.76 trillion over the next decade.

The deficit picture, according to the CBO, would be even worse if Bush succeeds with a top domestic priority, persuading Congress to make permanent the tax cuts of his first term. They are scheduled to expire at the end of 2010.

Extending the cuts through 2016 would add $2.2 trillion to the deficit. The cost would climb to $3.26 trillion if a permanent fix is made to the alternative minimum tax, which is designed for the wealthy but is ensnaring more middle-income taxpayers.

Looking beyond these numbers offers little encouragement as the country will experience a higher percentage of elderly individuals in the coming years as baby boomers retire and the social security and Medicare system are further stretched and stressed. While the GOP has argued that the tax cuts have spurred economic growth, there is little evidence to suggest that the gains would be sufficient to overcome the anticipated revenue shortages.

One is left to wonder at what point Americans will realize that deficit spending will eventually have to cease...which may be accompanied by the need to generate additional revenues in the form of tax increases or significant cuts in social services, including the Social Security system. Perhaps the less than favorable polling on the economy indicates that Americans realize a reckoning is in the offing.