The new budget numbers from CBO are even worse than you think

Here’s why the headlines understate the gravity of our situation. CBO is required to use current law as the basis for its estimates—to assume, for example, that all the Bush tax cuts will expire at the end of 2012, that Medicare payments to physicians will be cut sharply, and that the alternative minimum tax will be allowed to affect millions more Americans. Using these assumptions, taxes as a share of GDP would by allowed to increase by five percentage points by 2014 and would keep on rising thereafter, we’d have a cumulative deficit of about $7 trillion dollars over the next decade, and debt held by the public would increase from 62 percent to 77 percent of GDP. Using more politically realistic assumptions, the cumulative deficit would be about $12 trillion, and debt held by the public would reach 97 percent of GDP, the highest level since 1946 (when it was headed down, not up)…

I wish I could say that today’s elected officials are as serious about our fiscal future as Clinton was. Republicans are proposing damaging cuts in domestic discretionary spending (a small part of the total budget) while ducking far more important drivers of the long-term deficit problem—such as entitlements. Democrats seem to be hoping that they can score tactical political points by hanging back and forcing the Republicans to put specifics on the table. And although the State of the Union address left the door open to a serious discussion, not even the president’s supporters are claiming that it etched a profile in fiscal courage. (As intended, his investment message had far more resonance.) Senator Kent Conrad, the Democratic chair of the Senate Budget Committee, is publicly lamenting the president’s unwillingness to join in a budget summit with the bipartisan congressional leadership.