OMB Just Estimated A $1.416 Trillion FY11 Deficit, $150 billion Higher Than In February.
Because of the bad news about the FY11 deficit, OMB withheld the Mid-Session Review 8 days beyond its statutory deadline until 3 p.m. this afternoon. Technical reestimates of individual income tax and Social Security taxes were the primary reason for the deterioration along with somewhat weaker wage growth. Usually that means taxpayers fell into lower tax brackets and claimed more deductions and credits than estimated. The FY10 deficit was reestimated $79 billion lower than in February because of lower outlays for unemployment compensation, FDIC deposit insurance, and a broad range of discretionary spending. The real GDP forecast was raised to 3.2% for CY10 from 2.7% in February and was lowered to 3.6% for CY11 from 3.8%. This is confirmation of my long held expectation that we're going to see deficits of at least $1 trillion for years to come.
When you say "$1 trillion for
When you say "$1 trillion for years to come" you mean up to and not after FY11, right. Neither the CBO or the OMB are close to $1 trillion in deficits for FY12 or FY13. Admittedly we could have another round of stimulus that brings us closer but that has nothing to do with the recent OMB revision and is confirmation of nothing on your part.
When you say "$1 trillion for
No. I meant $1 trillion deficits each year through at least FY12 and possibly FY13. Don't be mislead by those baseline deficits. CBO's declines rapidly because it is constrained to present law with a few exceptions, so the CBO baseline assumes all of the Bush tax cuts expire, that the Alternative Minimum Tax is not adjusted, and that the wars end. When you add those back in, you easily reach $1 trillion each year.
OMB's baseline is a little more realistic because it doesn't assume the expiration of the Bush tax cuts, except for those over $250,000, or a fixed AMT, but it assumes all of President Obama's budget proposals are enacted. Take those out and assume worse than forecast revenue growth, like we just saw in the Mid-Session Review, and you get to $1 trillion a year for the next several years as well.
Thanks for pointing that out.
Thanks for pointing that out. I took a closer look and what you say is true but also $1 trillion just isn't what it used to be. For example they forecast a deficit of $900M in 2010 - which is only 3.8% of GDP. By 2013 $1 trillion amounts to 5.8% of GDP. Definite improvement from the approximate 9.1% deficit that Obama inherited especially considering the miserable economy that Obama inherited. What I've realized is that using the number $1 trillion is a scare tactic. Much like $1 billion used to be a scare tactic.
I hope the American public doesn't let the use of numbers like $1 trillion overshadow the urgent need for jobs.
And I hope we don't let the
And I hope we don't let the delusion that government can create jobs serve as an excuse to have ridiculous deficits in perpetuity.
Unemployment deficit
The Clinton experience was that as unemployment decreased, tax revenues increased. The Clinton surplus was "unexpected". We will never make progress against the deficit until we reduce unemployment and get health care costs under control.
Unemployment deficit
Yes. We face long-run labor force and health cost problems that will keep our economy weak until we fix them.
Yes, if we could only stop
Yes, if we could only stop worrying about people having money and staying healthy, everything would be great.