from Renewing America

U.S. Budget Policy: Problem Solved?

April 12, 2013

Blog Post
Blog posts represent the views of CFR fellows and staff and not those of CFR, which takes no institutional positions.

The Obama administration’s long-term budget projection estimates government debt as a share of GDP will remain stable until 2050, then decline, and in seventy-five years place the U.S. federal government in a net creditor position equal to around 60 percent of GDP. This is a more optimistic projection than produced by the Congressional Budget Office and independent commissions studying deficit reduction.

On his blog Macro and Markets, CFR’s Robert Kahn warns of the implications of trusting long-term estimates and notes that the administration’s projection is based on three assumptions: revenue will increase sharply over time as a share of GDP because the tax code is not fully indexed for inflation, the Affordable Care Act will reduce entitlement spending, and discretionary spending will fall as a share of GDP. Though each of the assumptions in the report is defensible, they could prove to be far off base, and present policymakers “a risky case for doing nothing.” You can read the full blog post here.