The new Congressional Budget Office budget projections released today show that the nation faces a fourth consecutive year of substantial budget deficits. Some seek to portray "runaway domestic spending" or growth in the costs of entitlement programs as the primary cause of the shift in recent years from sizeable surpluses to large deficits. Such a characterization is incorrect. In 2005, the cost of tax cuts enacted over the past four years will be nearly four times the cost of all domestic program increases enacted over this period. …At 16.8% this would be the lowest percentage of GDP received as revenues by federal government since prior to 1962, when the CBO table begins. See Historical Budget Data from CBO office, table 2.
The Administration has repeatedly defended its tax cuts as a needed stimulus during the recent economic downturn. But the downturn is behind us, and the cost of the tax cuts is scheduled to increase in the years ahead. Indeed, some of the tax cuts enacted in 2001 that benefit only high-income households have not even started to take effect yet. The repeal of the “personal exemption phase-out” for high-income taxpayers, as well as repeal of the limitation on itemized deductions for high-income taxpayers, do not start to phase in until 2006 and do not take full effect until 2010. Estate tax repeal also does not take effect until 2010. …
In 2000, federal revenues equaled 20.9 percent of the Gross Domestic Product, the basic measure of the size of the economy. CBO projects that in 2005, revenues will amount to just 16.8 percent of GDP.
Tuesday, January 25, 2005
CBO Data Show Tax Cuts Have Played Much Larger Role Than Domestic Spending Increases In Fueling The Deficit