The Congressional Budget Office (CBO) Tuesday provided a sneak preview of its forecast for the nation’s finances over the next decade. And the news isn’t good. The CBO projects that, after years of shrinking, the federal deficit will grow in fiscal year 2016 to $544 billion, a $130 billion increase over what the office previously predicted.
Tuesday’s report summarizes the top-line findings of the CBO’s annual “Budget and Economic Outlook” document, which will be released next week. It’s pretty easy to see why the CBO wanted to give Congress as much time as possible to mull these data over: they show the nation’s finances deteriorating dramatically going forward.
The shift from decreasing to growing deficits shouldn’t be surprising to members of Congress who in December enacted tax extenders, a huge package of primarily business-oriented tax cuts. The short-term cost of this “extenders” tax package explains virtually all of the big bump in the forecast 2016 deficit.
If nothing changes, deficits will only continue to grow after 2016, according to CBO. In fact, the new CBO data show annual budget deficits gradually growing to more than $1 trillion by 2022. This means that 10-year budget deficits totaling almost $9.4 trillion will face our next commander in chief.
All of which makes the fiscal policy priorities of most of the presidential candidates seem even more surreal. Faced with a massive, $9.4 trillion 10-year budget hole, the most sensible directive for fiscal policy going forward would be to “stop digging.” Unfortunately, the tax policy proposals outlined by every Republican candidate would dramatically decrease federal revenues and make the 10-year budget deficit at least twice as big as what the CBO is currently projecting.
Doubling down may be an entertaining strategy for gamblers, but it is no way to run a country. The new CBO data make it clear that the main criterion for evaluating sensible tax reform plans going forward must be that these plans raise new revenues, both to reduce the budget deficit and to pay for essential government programs on which all Americans rely.