Today, the Congressional Budget Office released its long-term budget outlook. Again, the forecast going forward to 2035 and beyond was a grim reminder of the fiscal future that awaits the U.S., especially if Congress does what it has done for the past ten years: increase spending and cut taxes.
The federal budget deficits for 2009, 2010 and 2011 are large and historic, but they are not entirely the result of changes made by the current administration. While partly structural, those deficits are mostly cyclical, i.e. the result of a downturn in the macroeconomy and not the result of policy changes implemented today. The stimulus bill, judging by a static score, did increase the deficit. However, the deficit would have still approached record levels had Obama and Congress done nothing. Some Keynesians may even argue that the stimulus bill somewhat paid for itself and didn't add to the deficit much at all, or possibly even made it less. (I would like to hear Krugman's or DeLong's answer to how much of the stimulus bill "paid for itself" by spurring the economy and boosting revenues elsewhere, although both of them tend to say the stimulus bill was far from ideal in terms of its content and size.)
The large deficits we face today and faced last year should not be confused with the structural deficits in the years going forward. That is, even if the economy is healthy from 2015 onward, the United States faces serious issues with its budget. "Structural deficit" is the term given to the deficit when the economy is at its potential (i.e. not in contraction or rapid expansion).
The dire outlook from CBO today is not the fault of the current administration or any one administration (LBJ may be the most to blame I guess for starting Medicare). In fact, if the Medicare cuts in the health care bill are to be believed and CBO's estimates pertaining to the health care bill are to be believed, Pres. Obama has already done more to reduce in magnitude the long-term budget problems for the U.S. than the previous administration, who undoubtedly made the problem worse. That's true despite the amount added to the deficit from the stimulus bill and the costly coverage provisions in the health care bill. The obvious question is whether or not you believe the large cuts to Medicare will ever pan out. If not, Obama's fiscal record thus far is about as bad as the previous administration's.
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