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CBO: Fictional, Real Deficit Projections Converge

Tuesday January 19th, 2016   •   Posted by Craig Eyermann at 6:04pm PST   •  

17570331_S If you paid attention to the news from Washington, DC today, you might think that the cause of deficit reduction took a big hit today because of a number of tax cuts that were made permanent. Here’s how NPR reported the story:

Once Upon A Time, Congress Cut Deficits; Now CBO Says That’s Over

For six straight years, Americans watched their government’s borrowing shrink.

Then last month, that trend towards less and less borrowing suddenly came to an end. Congress overwhelmingly passed a federal budget that included a $680 billion tax-cut package, which President Obama signed.

Now the nonpartisan Congressional Budget Office says the federal deficit is set to jump 24 percent, to $544 billion, in this fiscal year. That’s up from last year’s $439 billion deficit.

The CBO’s latest estimate, released Tuesday, also said economic growth will be somewhat slower than originally forecast, reducing tax revenues for this year.

“This report makes it abundantly clear that the era of declining deficits is over,” Maya MacGuineas, head of the bipartisan Campaign to Fix the Debt, said in a statement. “Thanks to a series of huge and irresponsible unpaid-for tax cuts and spending increases last year, deficits and the national debt are rising much higher and much faster than expected.”

Nowhere in NPR’s story however is that the portion by which the nation’s projected deficits will increase because of what Maya MacGuineas describes as “huge and irresponsible unpaid-for tax cuts” is completely fictional.

Here’s how we know. We’ve been paying attention to the CBO’s annual Budget and Economic Outlook ever since we launched the MyGovCost calculator. And in each and every single year that they’ve put out their 10-year forecast, they’ve provided both a “baseline” scenario and an “alternative fiscal” scenario.

The difference between the two scenarios comes down to this basic truth: the “baseline” scenario pretends that elected officials will never respond to political pressure from the special interests that fund their political campaigns and will allow all the tax cuts and special spending programs they demanded and got in return for their campaign “investments” to expire according to the law as it is currently written.

Those various expiration dates, by the way, are deliberately placed in the “temporary” tax cut laws by politicians elected to office so that their true cost over time is never honestly accounted for in the CBO’s baseline scenario. It’s a way for the politicians to make the fictional claim that their spending is under any kind of control and have it be believed by reporters who never think to consider otherwise.

The CBO’s nonpartisan analysts are smarter than that however. They developed the alternative fiscal scenario to account for how such tricksy politicians really behave. And in that scenario, the fiction of “temporary” tax cuts is assumed to be what it really is: false.

As a result, only the CBO’s alternative fiscal scenario has a much more real and honest relationship with the world in which we really live. That’s why we have only ever used the CBO’s alternative fiscal scenario to project the future cost of the U.S. federal government’s spending and various special interest giveaways in the MyGovCost calculator.

The real news is that for almost the first time since we first launched the MyGovCost calculator back in 2009, the separation between fiction and reality has narrowed!

But if it makes Ms. MacGuineas and NPR feel better, the huge and irresponible spending increases and worse economic growth that the CBO indicates will directly increase the size of the government’s deficits by more than the margin of shoddy fiction are indeed all too real.

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January 2016