CBO Predicts Ten Year Budget Deficit Approaching $3 Trillion

by Leroy Baker, Tax-News.com, New York

02 March 2004

According to the latest fiscal projections by the Congressional Budget Office, President Bush’s recent tax and spending plans will result in a budget deficit of $2.75 trillion over the next decade.

In its first detailed review of the President’s budget plan, the non-partisan office of Congress revealed that if tax and spending levels remain unchanged after factoring in inflation, the ten-year budget deficit will be $2 trillion. However, Mr Bush’s desire to extend several tax cuts due to expire in the coming years adds an additional $723 billion onto this base figure.

The latest estimates contrast sharply with those made three yeas ago which predicted a $5.6 trillion budget surplus for the ten-year period ending in 2011.

However, the CBO is predicting a $478 billion deficit for the coming year, which happens to be somewhat lower than the Bush administration’s own estimate of $521 billion. The CBO also forecasts that this will be reduced by around a half in three years' time to $242 billion.

Whilst the President’s tax cuts are clearly going to have an effect on revenues in the years ahead, many lawmakers and analysts alike are skeptical about the accuracy of the CBO’s projections. As Brian Riedl, a budget analyst with free market think tank the Heritage Foundation pointed out to the New York Times, a 1% change in economic growth in 2004 could alter future tax revenues by hundreds of billions of dollars, and the figures, therefore, should be taken “with a grain of salt.”

Mr Reidl added that it is more important to focus on the CBO’s prediction that tax revenues will rise by 30% over the next three years as a result of increased economic growth and activity.

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