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Analysis of CBO's August 2011 Baseline and Update of CRFB Realistic Baseline

August 24, 2011

Today, the Congressional Budget Office (CBO) released its Budget and Economic Update, under which current law debt is now projected to beon a declining path by mid-decade. According to CBO’s projections, debt held by the public will rise from 67 percent of GDP in 2011 to a high of 73 percent in 2013, before falling to 61 percent by 2021.

Drawing a AAA-Road Map for Post-Downgrade America

  • By
  • Marc Goldwein,
  • New America Foundation
August 11, 2011 |

The S&P downgrade late Friday afternoon in Washington kicked off the most anxious and frenetic week in world markets since the Great Recession ended. The rating agency's observation that U.S. politics was broken might have seemed like old news to voters, but to outsiders it was a stunning confirmation that the recovery is all but over and Washington has no clue how to get it back on track. But the panic over the downgrade and subsequent sell-off has glossed over what exactly our AA+ means for the economy, our prospects, and the road back to a sterling rating.

Understanding the S&P Downgrade

August 10, 2011


On Friday, August 5, the Standard and Poor’s (S&P) credit rating agency downgraded the long-term credit rating of the United States from AAA to AA+, issuing the country’s first downgrade from a major rating agency. The downgrade was issued in part because of the country’s high level of debt and the failure of recent legislation to control it. More significantly, though, the downgrade resulted from increasing questions over the nation’s political capacity to enact further deficit reduction in light of the recent debate.

Debt Deal Summary

August 1, 2011

Major Components

  • Three tranche debt ceiling increase
  • Ten year discretionary spending caps
  • Guaranteed vote on Balanced Budget Amendment
  • Joint Select Committee on Deficit Reduction to recommend $1.5 trillion in savings

Debt Ceiling Increase

Devil’s Advocate

  • By
  • Megan McArdle,
  • New America Foundation
August 9, 2011 |

If you had known Austan Goolsbee way back when, you might not have expected him to ever chair President Obama’s Council of Economic Advisers. Even now, at 41, he still looks more like one of his M.B.A. students than like a professor.

Obama’s Era of Decline

  • By
  • Peter Beinart,
  • New America Foundation
August 8, 2011 |

The decision by Standard & Poor's to downgrade America's credit rating marks the clearest sign yet that we have entered a new era in American politics.

In retrospect, the dominant political reality of the Clinton years was the culture war, a struggle over what kind of nation America would be once being anticommunist ceased being a meaningful national identity. Politics in the Bush years was dominated by the "war on terror," the right's effort to reenact the Cold War struggle and the left's recovery of its own antiwar tradition in response.

S&P Rating: How to Get Back to AAA

  • By
  • Maya MacGuineas,
  • New America Foundation
August 8, 2011 |

Oh, AAA credit rating -- we never knew how much we loved you until we lost you. Just one more chance, please!

It's like a bad breakup. The warning signs were there. He starts to nitpick and then complain so much more than when the romance began. Remember when you could do no wrong?

He went along when you demanded all the luxuries in life even though you couldn't afford them. What's a few overextended credit cards when you are having a good time?

And then, he started issuing those self-important warnings? Who does he think he is?

With Downgrade, Now Can We Get Serious About Debt?

  • By
  • Maya MacGuineas,
  • New America Foundation
August 6, 2011 |

You can't say we didn't have a heads up. Just a few weeks ago, S&P said:

"We may lower the long-term rating on the U.S. by one or more notches into the 'AA' category in the next three months, if we conclude that Congress and the Administration have not achieved a credible solution to the rising U.S. government debt burden and are not likely to achieve one in the foreseeable future."

Government Spending Through the Tax Code Is Invisible and Regressive

August 3, 2011

Congress uses the tax code to promote a broad range of policy objectives. Rather than directly spend government revenue on policy programs—or implement new regulation—Congress has enacted a series of tax provisions that effectively subsidize certain politically and socially desirable activities.

These “tax expenditures” take the form of deductions, exemptions, or credits to taxpayers who engage in the targeted activity. From a budgeting perspective, they are treated as foregone government revenue, rather than increased government expenditure.

Debt Deal: We Can, and Must, Do Better

  • By
  • Maya MacGuineas,
  • New America Foundation
August 2, 2011 |

Picture a negotiation with your boss that goes something like this:

You walk in with dynamite strapped to your body and demand a raise.

Nope, he says, no raise -- that's off the table.

Fine, you say, then I am not going to do any work.

I can take that, he says, as long as it goes hand in hand with no benefits for you.

All righty then, you counter, but I'll be stealing office supplies.

Fine. Fine. You shake and you have a deal.

That's how the debt-ceiling deal feels to me.

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