CBO: 2010 Deficit to Fall to $1.35 Trillion

In case you missed it, the Congressional Budget Office (CBO) just released its 2010 Budget Outlook [1], its yearly look at the health of the federal budget. CBO's director, Doug Elmendorf, provides the basics of the report:

CBO projects, that if current laws and policies remained unchanged, the federal budget would show a deficit of $1.35 trillion for fiscal year 2010. At 9.2 percent of gross domestic product (GDP), that deficit would be slightly smaller than the shortfall of 9.9 percent of GDP ($1.4 trillion) posted in 2009.

While there are some no-brainers in the outlook (who knew deficits were caused by spending outstripping revenues?), the report does helpfully identify the many causes of the current deficit: Bush's tax cuts, the two wars, and the Great Recession. And while the deficit is falling for the next few years, which is generally a good thing, the outlook warns that deficits will still average about $600 billion a year for the next ten years.

In other fun developments, this year the CBO added a quite useful chart [2] to its outlook webpage. The chart, which is pictured below, shows the deficit over the next ten years. While it's good to have a visual representation of how the deficit is getting better over the next few years (up in this graph is good), what's really useful is that it lets users see how various policies would affect the deficit. Wonder how reducing US troops in Iraq and Afghanistan would change the deficit? (If so, see the chart below; the bottom line is the baseline, top line is with only 30,000 troops in the two countries) How about extending the Bush tax cuts? Freezing all discretionary spending? This graph will show users just how far into the red select proposals will push us.

[3]

For more on the outlook, check out tomorrow's (Thursday's) Senate Budget Committee hearing [4], featuring testimony by Elmendorf. The Committee's chairman, Sen. Kent Conrad, just saw his deficit commission [5] die on the Senate floor, so expect a lot of questions from the Senator on ways to reduce the deficit.