Deficits and Projections

Commentary:
Why Balancing the Budget by the End of the Decade Is Not the Right Goal

"As the House and Senate consider their respective budget resolutions this week, a key point of debate will be whether balancing the budget over the decade is an essential goal. We don’t think it is."

Serious, bipartisan plans over the last several years “sought to reverse the upward trend in the debt ratio, but without chasing the bumper-sticker slogan of a balanced budget. Congress should do the same when it considers its budget this week. Balancing by the end of decade requires a debt-reduction path that is simply too steep. Once the budget is on a more sustainable path and the economy is stronger, a balanced budget or even small surpluses could materialize — as they did during the Clinton Administration — but balance as the singular fiscal goal is not very meaningful and is inappropriate for the coming decade."
 

Deficit Reduction Should Not Increase Poverty and Hardship

With President Obama and lawmakers of both parties vowing to achieve further deficit reduction, the stakes are high for low- and moderate-income Americans. If policymakers heavily target programs that serve vulnerable Americans, they will run the risk of increasing poverty and hardship and reducing opportunity for those on the lower rungs of the economic ladder, limiting their future educational and employment prospects. If, however, policymakers take a more balanced approach to deficit reduction, one that includes adequate new revenues to complement additional spending cuts, they can further reduce deficits while maintaining the resources to invest in key building blocks of future prosperity, including effective services and supports for poor families and children.

What Is Driving the Large Projected Deficits?

"Federal deficits and debt have risen sharply under President Obama, but the evidence continues to show that the Great Recession, President Bush’s tax cuts, and the wars in Afghanistan and Iraq explain most of the deficits that have occurred on Obama’s watch…."

Background

In December 2008 the Center issued new long-term projections showing that deficits and debt will grow to dangerous levels if policy changes are not made.  Our analysis demonstrates the effects that projected demographic changes and increases in health care costs will have on projected expenditures for Medicare, Medicaid, and Social Security.  It also shows the importance of upcoming tax-policy decisions, particularly whether to make the 2001 and 2003 tax cuts permanent without offsetting their costs.  In addition, the analysis shows that entitlement programs other than the “big three” are not contributors to the long-run fiscal problem.