« The August Porker of the Month is . . .(Drumroll, Please) | Main | A Thought on Taxes, Politicians, and Redistribution »

Federal Government Will Collect a Lot of Taxes, Spend More

This morning, the Congressional Budget Office(CBO) released their semi-annual Budget and Economic Outlook report for the years 2015 to 20125. According to Scott Greenberg, at the Tax Foundation's Tax Policy blog, the report "forecasts the federal budget deficit over the next ten years, as well as several other economic indicators. An important part of this forecast is CBO’s projection of federal revenues, which determine whether the federal government will bring in enough money in taxes to pay for its spending programs."

Greenberg identifies his  "four tax takeaways" from the CBO report, explaining each:

  • Tax collections have grown significantly in 2015.
  • This year’s growth in federal tax revenue was largely unexpected, and is the main reason why the deficit has fallen.
  • In the next ten years, the individual income tax will become an increasingly important source of federal revenue.
  • Over the next ten years, federal revenues will be higher than the historical average.

The CBO's 2015-2025 Budget and Economic Forecast can be accessed here. Their overall conclusion from the summary says:

"According to the Congressional Budget Office’s estimates, this year’s deficit will be noticeably smaller than what the agency projected in March, and fiscal year 2015 will mark the sixth consecutive year in which the deficit has declined as a percentage of gross domestic product (GDP) since it peaked in 2009. Over the next 10 years, however, the budget outlook remains much the same as CBO described earlier this year: If current laws generally remain unchanged, within a few years the deficit will begin to rise again relative to GDP, and by 2025, debt held by the public will be higher relative to the size of the economy than it is now.

"CBO’s economic forecast, which serves as the basis for its budget projections, anticipates that the economy will expand modestly this year, at a solid pace in calendar years 2016 and 2017, and at a more moderate pace in subsequent years. The pace of growth over the next few years is expected to reduce the quantity of underused resources, or “slack,” in the economy, lowering the unemployment rate and putting upward pressure on compensation as well as on inflation and interest rates."

In addition, CBO's report summary makes three important points:
  1. The Budget Deficit for 2015 Will Be Smaller Than Last Year’s
  2. Rising Deficits After 2018 Are Projected to Gradually Boost Debt Relative to GDP
  3. The Economy Is Expected to Grow Modestly This Year and at a Solid Pace for the Next Few Years

Not surprisingly, the report is filled with numbers, tables, charts, and figures, which begin on the report cover. For example, the cover shows total revenues in 2015 will be 18.2% of GDP in 2015 and 18.3% in 2025. However, total outlays are expected to grow from 20.6% in 2015 to 22.0% in 2025. As a result, the annual deficit would grow from 2.4% of GDP in 2015 to 3.7% by 2025. All of that growth in outlays, unfortunately, results from the growth of the two large, so-called entitlement programs, Medicare and Social Security.

This morning, Keith Hall, CBO director, briefed the press on the CBO's budget and economic analyses. The C-SPAN video lasts 43 minutes. His briefing slides are available at the CBO blog.

In news coverage on the CBO report this evening, the headline on MCClatchy's report, which says "short term good, long term blah," pretty much says it all.

The Washington Examiner's Joseph Lawler includes this quote in his report on the CBO's latest release of their budget and economic outlook:

"Republican Mike Enzi of Wyoming, chairman of the Senate Budget Committee, attributed the falling deficit to spending caps put in place as part of negotiations over the federal debt ceiling.

"Today's report from CBO demonstrates the tremendous impact the budget caps approved as part of the Budget Control Act have had on our overspending as the nation's annual deficit forecast for 2015 will be at the lowest level in years," Enzi said in a statement. "Our nation's long-term debt outlook, however, is not so rosy. I would caution those who would use this report as an opportunity to take these short term-savings and push for more spending."

So, while the federal government is set to collect more taxes, it's also set to spend an ever larger share of GDP on the largest of the so-called entitlement programs. Unfortunately, in an ever more dangerous world, spending on defense is expected to decrease from 3.3% of GDP to 2.6% of GDP.

Do you know what your Congress Critters on Capitol Hill are doing to bring the federal budget under control? We urge Growls readers to communicate with their members of Congress, and find out. Contact information is available at Thomas (use left-hand column). Taxpayers living in Virginia's Arlington County, can contact:

  • Senator Mark Warner (D) -  write to him or call (202) 224-2023
  • Senator Tim Kaine (D) -- write to him or call (202) 224-4024
  • Representative Don Beyer (D) -- write to him or call (202) 225-4376

Ask for a written response, and tell them ACTA sent you.

UPDATE (8/26/15): At their blog, the Committee for a Responsible Federal Budget (CRFB) concludes their analysis of the CBO's updated outlook by writing:

"CBO shows an unsustainable fiscal outlook under current law, and an even more dangerous one if policymakers continue to act irresponsibly. Lawmakers will therefore need to strictly abide by pay-as-you-go rules and take steps to control the growth of entitlement spending, while enacting other tax and spending reforms to put debt on a downward path over the long run."

UPDATE (8/26/15): In writing about the CBO's new report, the Washington Times' Stephen Dinan writes:

“The growth in debt is not sustainable,” CBO Director Keith Hall said in presenting the estimates. “At some point, it’s going to get to a very high level. Obviously, you can’t predict tipping points, but at some point this becomes a problem.”

"Democrats saw the short-term outlook as progress and said it’s time to close tax breaks and bring in more revenue for spending on investments such as infrastructure.

"Republicans kept their focus on the longer-term warnings in the CBO report. They noted that taxes will remain higher than their historic average over the past five decades but deficits will persist because spending will still outpace revenue.

"Budget watchdogs pleaded with all sides to go beyond the numbers and talk about solutions to persistent debt.

“I don’t know how anyone can declare victory when trillion-dollar deficits are just on the horizon,” said Judd Gregg, a former senator and a co-chairman of the advocacy group Fix the Debt. “While deficits are down this year, the real story is that they are on the rise and that our national debt is at record-high levels and growing."

"Watchdogs pleaded with presidential candidates to start talking about the national debt in their campaigns."

UPDATE (8/27/15): The headline of an editorial, posted last night for today's Investor's Business Daily, says, "The nation's budget outlook is worse than you think." Here are the first and last paragraphs:

"The bad news is that the country is headed toward $1 trillion deficits in 10 years, according to the Congressional Budget Office. The worse news is that, if history is any guide, this forecast is probably way too optimistic.

< , , , >

"The CBO's latest grim 10-year forecast can be avoided. But only if lawmakers take it as a best-case scenario and act accordingly."

(UPDATE (8/27/15): Yesterday, at the American Thinker blog, Rick Moran quotes the Washington Times article, above, and then concludes:

"As a political issue, the debt is not very sexy.  At the moment, it is only remotely connected to people's everyday lives.  But once the deficits begin rising toward a trillion dollars again, people are going to have to sit up and take notice.

"A lot of that increase in the deficit will come from a massive increase in servicing the debt.  With interest rates at zero, debt servicing is less than $250 billion.  But once the Fed starts to bring interest rates back to historic norms, debt servicing will skyrocket, perhaps as high as $800 billion.  It's easy to imagine the impact on defense spending and other vital government programs that the increase in debt servicing will have.

"Sadly, it appears that nothing will be done about the structural deficit caused by rapidly increasing payments to Social Security and Medicare recipients.  In fact, not much will happen until the crisis is already upon us, and the solution then will be far more wrenching than if we began today to address the problem."


TrackBack URL for this entry: