Tuesday, February 11, 2014

This is why the CBO’s deficit report is bad news

This week the CBO released its latest “Budget and Economic Outlook.” At first glance, it looks encouraging. 2014’s deficit will clock in at $514 billion – “only” a 3% share of the United States’ GDP.

That’s a drop from last year, and well under 2009’s $1.4 trillion deficit. This year’s deficit will be the smallest since 2007.

But why has the deficit shrunk?

The automatic sequester in the Budget Control Act was substantially responsible for this decrease, something both the President and Congress just got rid of.

Many in the media and Obama administration view the CBO’s report as good news. But a closer look at the CBO’s predictions shows there’s not much to celebrate.

In fiscal years 2014-2015, the deficit does indeed fall; it’s expected to drop another $36 billion next year. In 2016, though, things change: from then on, the deficit skyrockets, growing by an average of $66 billion a year.

Over the next ten years, just the interest on the debt will grow to 1.3% of GDP, nearly quadrupling.

The reason? While federal revenues are expected to grow in sync with GDP, spending growth is projected to far outpace GDP growth.

Full article: http://rare.us/story … -report-is-bad-news/

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