In a blog post on Wednesday, I discussed CBO’s analysis of plans to reduce future budget deficits put forward by House Speaker John Boehner and Senate Majority Leader Harry Reid as part of proposals to raise the limit on the national debt. In the past couple of days, both the Speaker and Majority Leader have proposed revised versions of those plans. CBO’s estimates of the revised versions are described in these letters:
July 2011
In less than a week, according to projections from the Treasury Department, the U.S. government will begin defaulting on some of its obligations unless the Congress and the President increase the statutory ceiling on federal debt.
House Speaker John Boehner and Senate Majority Leader Harry Reid recently put forward plans to reduce deficits over the next decade as part of proposals to raise the limit on the national debt. CBO has estimated the budgetary effects of those plans—both titled the Budget Control Act of 2011. CBO’s estimate for the legislation proposed in the House can be found here; our estimate for the legislation proposed in the Senate can be found here.
What Would the Proposals Do?
This morning Heidi Golding, one of CBOs experts on military and veterans compensation, testified before the Senate Committee on Veterans Affairs on the prospective demands that veterans returning from recent and ongoing military operations will place on the health care system of the Department of Veterans Affairs (VA). Those operations (overseas contingency operations, or OCO) are Operation Iraqi Freedom, which ended in August 2010; Operation New Dawn, the ongoing military engagement in Iraq; and Operation Enduring Freedom, in Afghanistan.
This morning Deputy Assistant Director for Budget Analysis, Theresa Gullo, testified before the House Committee on Oversight and Government Reform on CBOs analysis of the Presidents proposal to expedite the disposal of unneeded federal civilian real property. Such property consists of buildings, structures, and lands owned by the federal government within and outside of the United States.
Federal lawmakers have recently considered several policies to alter the mix of fuels used to generate electricity in the United States. Those policies—referred to as renewable or “clean” electricity standards—would lead to greater reliance on energy sources that produce few or no emissions of carbon dioxide (CO2), the most prevalent greenhouse gas contributing to climate change. Currently, only about 10 percent of U.S. electricity is produced from renewable sources.
Earlier this week, I wrote a blog posting about the challenges facing policymakers as they work to put the federal budget on a sustainable path.
The central conclusion in the earlier posting, illustrated by the following chart, was the following: Given the aging of the population and the rising cost of health care, attaining a sustainable budget for the federal government will require the United States to deviate from the policies of the past 40 years in at least one of the following ways:
As the nation addresses the budgetary challenges facing the federal government, one of the central questions to resolve is how big a government we want to have. During the past 40 years, government spending has ranged from as low as 18.2 percent of gross domestic product (GDP) in 2000 and 2001 to as high as 25.0 percent in 2009, averaging about 21 percent. Revenues, however, have averaged only 18 percent of GDP.
Adopting a deficit reduction plan would have three kinds of effects on the budget. One would be the direct effect of the plan’s changes to spending and revenues. A second effect would be a reduction in interest payments by the government, as smaller deficits would result in lower federal debt. A third effect would result from the fact that smaller deficits would affect the economy in various ways, in turn leading to further changes in federal spending and revenues.
In its latest Monthly Budget Review, CBO estimates that the Treasury Department will report a deficit of $973 billion for the first nine months of fiscal year 2011, $31 billion less than the $1,004 billion deficit incurred through June 2010. Revenues increased by $136 billion (or 8.5 percent) and outlays climbed by $104 billion (or 4 percent) from what they were at the same point last year.