Not only is the Congressional Budget Office predicting deficits at historic levels over the next 10 years:
CBO projects, that if current laws and policies remained unchanged, the federal budget would show a deficit of $1.3 trillion for fiscal year 2010. At 9.2 percent of gross domestic product (GDP), that deficit would be slightly smaller than the shortfall of 9.9 percent of GDP ($1.4 trillion) posted in 2009. Last year’s deficit was the largest as a share of GDP since the end of World War II, and the deficit expected for 2010 would be the second largest. Moreover, if legislation is enacted in the next several months that either boosts spending or reduces revenues, the 2010 deficit could equal or exceed last year’s shortfall.
but, if the so-called Bush tax cuts aren’t allowed to expire and the AMT isn’t indexed, we’ll have trillion dollar deficits for the next ten years:
Moreover, CBO’s baseline projections understate the budget deficits that would arise under many observers’ interpretation of current policy, as opposed to current law. In particular, the projections assume that major provisions of the tax cuts enacted in 2001, 2003, and 2009 will expire as scheduled and that temporary changes that have kept the alternative minimum tax (AMT) from affecting many more taxpayers will not be extended. The baseline projections also assume that annual appropriations rise only with inflation, which would leave discretionary spending very low relative to GDP by historical standards. If the tax cuts were made permanent, the AMT was indexed for inflation, and annual appropriations kept pace with GDP, the deficit in 2020 would be nearly the same, historically large, share of GDP that it is today.
At that point interest on the debt would be exceeded only by Social Security and Medicare as a proportion of the budget. Are you concerned now?
Don’t expect robust economic growth to save us from making painful decisions. There’s no foreseeable level of growth that would do that. We’re either going to start making sharp cuts in things we don’t want to cut, we’re going to raise taxes enormously, both, or we’ll have deficits as far as the eye can see and interest rates that are unbearably high.