The Washington Post lead editorial for August 29 adjusts the baseline budget forecast for several factors. The largest is discretionary spending, which they argue will grow at the rate of the economy rather than at the rate of inflation. The next largest is extension of most of the Bush tax cuts beyond their scheduled expiration date. The other major items are a prescription drug benefit, reform of the alternative minimum tax, and additional interest payments due to higher deficits caused by the other factors.
And the result? Cumulative deficits of $4.3 trillion through 2013 -- three times the CBO's official projection. To look at it another way, in 2008 -- the point at which the administration insists the deficit will be cut in half -- the deficit would be just under $400 billion. By 2013, it would be $550 billion.
For Discussion. Should Congress and the President be required to make Budget decisions that are consistent with a balanced budget at full employment? How do problems in Budget forecasting make it difficult to plan medium term fiscal policy?