Reference: CRS on Reducing the Budget Deficit

Congressional Research Service
April 22, 2011 – R41778

The budget deficit (the difference between outlays and revenues) each year from 2009 to 2011 has been the highest ever in dollar terms and significantly higher as a share of gross domestic product (GDP) than in any other year since World War II. The budget is not projected to be on a sustainable path under current policy, in the sense that it would cause the federal debt to continuously grow more quickly than GDP. While there has been no difficulty financing the deficit to date, at some point, investors could refuse to continue to finance deficits that they believed were unsustainable. As one example of the policy changes that would return the budget to a sustainable path, CRS estimates that to stabilize debt as a share of GDP at its 2011 level would require budget deficits averaging no more than 2.5% to 3% of GDP over the next 10 years. In dollar terms, this would amount to a deficit of about $400 billion in 2012, rising to about $550 billion in 2015. Under a current policy baseline, the deficit would decline from more than 9% of GDP in 2011 to 5% of GDP in 2014, and rise to 6% of …

Phi Beta Iota:  What many do not know is that CRS — as good as its people are — is constrained by corrupt Congressional mandates on what its operating assumptions will be.  The sucking chest wound in this report is the assumption that US GDP will continue to grow.  Our crude lay estimate is that it will collapse in 2013-2014 and there will be a decade-long slump during which localized resilience endeavors and alternative forms of monetary exchange will go completely off the financial charts.