CBO: Policymakers need - at some point - to raise taxes significantly

[웃 910]

On the left (liberal) you have fiscal conservatism....on the right (Republican) you have fiscal psychosis where you are adding a half a trillion to the deficit and thinking you are a fiscal conservative!

Fiscal Tightening in 2013 and Its Economic Consequences - Infographic

Under current law, a sharp reduction in the federal budget deficit between 2012 and 2013 will cause the economy to contract, the Congressional Budget Office projects, but will also put federal debt on a path more likely to be sustainable over time. To illustrate the effects of fiscal tightening, CBO compared its projections under current law (the "baseline" projections) with projections under an alternative set of policies — two scenarios in a broad spectrum of choices.

http://www.cbo.gov/publication/43544

Edited August 22, 2012 by ☠

[웃 910]

"

For fiscal year 2012 (which ends on September 30), the federal budget deficit will total $1.1 trillion, CBO estimates, marking the fourth year in a row with a deficit of more than $1 trillion. That projection is down slightly from the $1.2 trillion deficit that CBO projected in March. At 7.3 percent of gross domestic product (GDP), this year’s deficit will be three-quarters as large as the deficit in 2009 when measured relative to the size of the economy. Federal debt held by the public will reach 73 percent of GDP by the end of this fiscal year—the highest level since 1950 and about twice the share that it measured at the end of 2007, before the financial crisis and recent recession.

CBO expects the economic recovery to continue at a modest pace for the remainder of calendar year 2012, with real (inflation-adjusted) GDP growing at an annual rate of about 2¼ percent in the second half of the year, compared with a rate of about 1¾ percent in the first half. The unemployment rate will stay above 8 percent for the rest of the year, CBO estimates, and the rate of inflation in consumer prices will remain low.

CBO has prepared—as it does under its routine procedures—baseline projections that incorporate the assumption that current laws generally remain in place; those projections are designed to serve as a benchmark that policymakers can use when considering possible changes to those laws. However, the outlook for the budget deficit, federal debt, and the economy are especially uncertain now because substantial changes to tax and spending policies are scheduled to take effect in January 2013. Therefore, CBO has also prepared projections under an alternative fiscal scenario, which embodies the assumption that many policies that have recently been in effect will be continued.

Key aspects of our projections are illustrated in the figures below.

What Policy Changes Are Scheduled to Take Effect in January 2013?

Among the policy changes that are due to occur in January under current law, the following will have the largest impact on the budget and the economy:

• A host of significant provisions of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Public Law 111-312) are set to expire, including provisions that extended reductions in tax rates and expansions of tax credits and deductions originally enacted in 2001, 2003, or 2009. (Provisions designed to limit the reach of the alternative minimum tax, or AMT, expired on December 31, 2011.)
• Sharp reductions in Medicare’s payment rates for physicians’ services are scheduled to take effect.
• Automatic enforcement procedures established by the Budget Control Act of 2011 (P.L. 112-25) to restrain discretionary and mandatory spending are set to go into effect.
• Extensions of emergency unemployment benefits and a reduction of 2 percentage points in the payroll tax for Social Security are scheduled to expire.

What Is the Budget and Economic Outlook for 2013?

CBO’s Baseline: Taking into account the policy changes listed above and others contained in current law, under CBO’s baseline projections:

• The deficit will shrink to an estimated $641 billion in fiscal year 2013 (or 4.0 percent of GDP), almost $500 billion less than the shortfall in 2012.
• Such fiscal tightening will lead to economic conditions in 2013 that will probably be considered a recession, with real GDP declining by 0.5 percent between the fourth quarter of 2012 and the fourth quarter of 2013 and the unemployment rate rising to about 9 percent in the second half of calendar year 2013.
• Because of the large amount of unused resources in the economy and other factors, the rate of inflation (as measured by the personal consumption expenditures, or PCE, price index) will remain low in 2013. In addition, interest rates on Treasury securities are expected to be very low next year.

An Alternative Fiscal Scenario: To illustrate the consequences of possible changes to current law, CBO has produced projections under an alternative fiscal scenario that incorporates the following assumptions: that all expiring tax provisions are extended indefinitely (except the payroll tax reduction in effect in calendar years 2011 and 2012); that the AMT is indexed for inflation after 2011; that Medicare’s payment rates for physicians’ services are held constant at their current level; and that the automatic spending reductions required by the Budget Control Act, which are set to take effect in January 2013, do not occur (although the law’s original caps on discretionary appropriations are assumed to remain in place).

That set of alternative policies would lead to budgetary and economic outcomes that would differ significantly, both in the near term and in later years, from those in CBO’s baseline:

• In 2013, the deficit would total $1.0 trillion, almost $400 billion (or 2.5 percent of GDP) more than the deficit projected to occur under current law.
• The economy would be stronger in 2013: Real GDP would grow by 1.7 percent between the fourth quarter of 2012 and the fourth quarter of 2013, and the unemployment rate would be about 8 percent by the end of 2013, CBO projects.

"

Published today...more here

[Mr. Big Dog 10,747]

CBO: Policymakers need - at some point - to raise taxes significantly

[웃 910]

I would propose 2 starting points for reaching a surplus...Or at least a step towards less mammoth deficits.

1) Look at last time a Republican balanced a budget. Very far back, I was not born yet...The mid-50s! And copy these REPUBLICAN tax rates.

2) Or go back to FY 2001 under Clinton, and copy the Far Left Liberal tax plan.

Edited August 23, 2012 by ☠

[Mr. Big Dog 10,747]

Any sane person knows that taxes will have to come up, defense spending needs to come down and entitlements need to be reformed. Healthcare cost needs to come down. Without that, there is no balanced budget anywhere in our future and this nation will collapse under the weight of the debt. It's really just that simple. Anyone that tells you otherwise is not being honest with you. Yes Mitt, I'm talking about you.