The Congressional Budget Office (CBO) released its annual Budget and Economic Outlook today, projecting a $1.1 trillion deficit for 2012 … and that’s not even the scariest finding in the report. Here are the top five most telling graphs if this year’s report.
1. Trillion dollar deficits for all four years of the Obama administration
From the report: “the federal budget will show a deficit of nearly $1.1 trillion in fiscal year 2012 (see Summary Table 1). Measured as a share of gross domestic product (GDP), that shortfall will be 7.0 percent, which is nearly 2 percentage points below the deficit recorded last year but still higher than any deficit between 1947 and 2008.”
2. Taxes set to rise by 31 percent
From the report: “Under current law—the assumption that underlies CBO’s baseline budget projections—revenues are projected to grow even faster between 2012 and 2014: by a total of 31 percent, far outstripping the 7 percent total growth in GDP projected for that two-year period. As a result, revenues as a share of GDP are projected to rise by 3.7 percentage points during that period, reaching 20.0 percent of GDP in 2014—a level that has been exceeded only once since World War II.”
3. Unemployment is steady and should be worse
From the report: “In CBO’s forecast, the unemployment rate in 2012 and 2013 remains largely unchanged from its value last year. … The unemployment rate would be even higher than it is now had participation in the labor force not declined as much as it has over the past few years. The rate of participation in the labor force fell from 66 percent in 2007 to an average of 64 percent in the second half of 2011, an unusually large decline over so short a time. … Had that portion of the decline in the labor force participation rate since 2007 that is attributable to neither the aging of the baby boomers nor the downturn in the business cycle (on the basis of the experience in previous downturns) not occurred, the unemployment rate in the fourth quarter of 2011 would have been about 1 and a quarter percentage points higher than the actual rate of 8.7 percent.”
4. Entitlement spending is driving deficits
From the report: “Mandatory spending is projected to rise from 13.3 percent of GDP in 2013 to 14.3 percent in 2022. That increase relative to the size of the economy is more than accounted for by growing outlays for Social Security, Medicare, and Medicaid, which are projected to rise from 10.6 percent of GDP in 2013 to 12.1 percent in 2022. … Projected discretionary spending decreases from 7.7 percent of GDP in 2013 to 5.6 percent in 2022. By 2022, discretionary spending would be a smaller share of the economy than it has been in any of the past 40 years.”
5. Social Security is already adding to the deficit
From the report: “Annual expenditures from the fund are projected to be greater than noninterest income, rising from $635 billion in 2012 to $1.1 trillion in 2022. As a result, the annual cash flows of the OASI program, excluding interest credited to the trust fund, will add to federal deficits in every year of the coming decade, by amounts that will grow to more than $100 billion by 2021. With interest receipts included, the OASI trust fund will show a surplus in every year through 2021, but the size of that surplus will decline markedly over that period. By 2022, the trust fund is projected to show a deficit.”
