The new CBO projections are in.
Even under CBO’s optimistic assumptions, which assume that in the short-term the stimulus bill will have some expansionist effects on the economy, our fiscal outlook looks grim:
The President’s proposals would add $4.8 trillion to the baseline deficits over the 2010–2019 period. CBO projects that if those proposals were enacted, the deficit would total $1.8 trillion (13.1 percent of GDP) in 2009 and $1.4 trillion (9.6 percent of GDP) in 2010. It would decline to about 4 percent of GDP by 2012 and remain between 4 percent and 6 percent of GDP through 2019.
That’s twice the projected deficit as a percent of GDP figures outlined in Obama’s budget.
But these numbers won’t stop the Democrats. According to Congressional Quarterly, “Democrats say they intend to pursue President Obama’s budget priorities, despite new Congressional Budget Office projections expected today that will show much deeper budget deficits.”
Here is one projection you can count on being accurate. This will result in a permanent expansion of the federal government even after the current spike of spending caused by the stimulus and financial bailouts. Based on government data and Obama’s proposed outlays through 2019, Figure 1 shows the dramatic increase in nondefense spending (defined as total spending minus defense spending and net interest) as a percentage of gross domestic product between 1990 and 2019. It’s not good.