More Details on the President's FY2009 Budget

As the Committee pointed out in its earlier release (FY 2009 Budget), the President’s Budget reaches balance in 2012 only through a number of questionable assumptions regarding future fiscal policy. This update will extend that analysis by looking in more detail at the policy and baseline assumptions that underlie the Administration’s budget request.

This paper has pointed out places where the policy assumptions made by the Administration have made the 2012 deficit seem smaller than it likely will be. Acknowledging that costs for wars in Iraq and Afghanistan are likely to continue for several years, that discretionary appropriations likely will not be held to below-inflation growth, and that the AMT patch has become an annual ritual leads us to estimate a deficit of $223 billion in 2012 (see table below).

FY 2012 Deficit After Removing Certain Budget Assumptions
(in billions of dollars)

Projected Budget Surplus                48
  Additional War Costs                 -26
  Out-year Discretionary at GDP       -121
  Out-year AMT Patches                -103
  Additional Debt Service              -21
Possible Budget Deficit               -223 
CRFB Calculations based on CBO and OMB data.

Even this number may prove to be too small, however. Given the current weakness in the economy and the unlikelihood that Congress will act on the President’s recommendations for reducing Medicare spending, it is quite possible that the deficit in 2012 will be far larger than this figure...

For the full text of the CRFB's release, please see the PDF attached below.