–Budget Groups Say CBO’s Baseline Understates Severity of Deficit Woes
–Committee For Responsible Federal Budget Urges ‘Smart’ Deficit Cuts
–Concord Coalition Says Realistic Assumptions Show $12T in New Debt

By John Shaw

WASHINGTON (MNI) – Several leading budget think tanks Tuesday said
the new budget and economic report by the Congressional Budget Office
shows how serious the nation’s fiscal problems are once realistic
adjustments are made to its headline projections.

“The good news is that under current law assumptions, the debt
would become more manageable in the medium term. The bad news is that
these policy assumptions are politically unrealistic, suboptimal, and
not a long-term fix,” the Committee for a Responsible Federal Budget
said in a statement.

Maya MacGuineas, the group’s president, said the CBO’s current law
baseline shows budget deficits falling sharply, but added that the
assumptions underlying these numbers are dubious.

Among other things, they assume that all the Bush era tax cuts will
expire and deep spending cuts will be imposed.

“These budget projections show that getting the debt under control
is not impossible, but they also represent a path that is both unlikely
to occur and far from the best way to govern,” she said.

“Congress should not rely on automatic cuts and large sudden tax
increases when the economy is likely to still be weak,” MacGuineas said.

She added that there are both “smart” and “mindless” ways to cut
the deficit. “Let’s hope Congress acts to pass a well-thought deal
rather than letting some automatic and blunt changes do their work for
them.”

Bob Bixby, executive director of the Concord Coalition, said the
CBO report is packed with “harsh realities” for those willing to examine
the numbers closely.

Bixby said his group has developed a baseline that incorporates
likely policy changes and it shows cumulative deficits of about $12
trillion over the coming decade.

Bixby said Congress should adhere to last year’s budget
agreement–and then do many more things over the coming years.

“We need a comprehensive plan that spreads the burdens and
sacrifices fairly, and includes all major areas of the budget:
entitlement programs, domestic discretionary spending, defense and
taxes,” he said.

The CBO reported Tuesday that it expects the fiscal year 2012
deficit to be $1.079 trillion, down from $1.296 trillion in FY’11.

Assuming current budget and tax laws continue, the CBO sees
deficits of $585 billion in FY’13, $345 billion in FY’14, $269 billion
in FY’15, and $302 billion in FY’16.

Looking further ahead, the CBO sees deficits of $220 billion in
FY’17, $196 billion in FY’18, $258 billion in FY’19, $280 billion in
FY’20, $279 billion in FY’21, and $339 billion in FY’22.

For the FY’13-17 period, the CBO sees cumulative deficits of $1.721
trillion. For the FY’13-22 period, the CBO sees cumulative deficits of
$3.072 trillion.

However, CBO director Doug Elmendorf said Tuesday that an
alternative fiscal policy baseline his agency has developed shows the
U.S. racking up about $11 trillion in additional cumulative deficits
over the next decade, not the $3 trillion that is in the CBO’s official
estimate.

At a briefing, Elmendorf emphasized that under budget law CBO must
make its baseline estimates by assuming current tax and spending laws
are unchanged.

He said this budget convention is becoming “less and less useful,”
and added the CBO report provides a “benchmark, not a forecast.”

** Market News International Washington Bureau: (202) 371-2121 **

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