In January, the Congressional Budget Office projected that the federal budget would maintain rough fiscal balance over the coming decade. Last week, CBO updated that forecast and found that the government would run a cumulative $2.3 trillion deficit. That sharp change reflected a slowing economy and rapid spending growth.
In the face of this worsening fiscal situation, both presidential candidates have proposed massive tax cuts that would only make things worse. Oh, they promise to cut spending to make up for lost revenues, and one of them claims that lower tax rates will bring in lots of new revenue. But their proposals dig awfully deep fiscal holes that they will find hard to fill by cutting outlays.
Combining the Tax Policy Center’s estimates of the revenue losses of each candidate’s tax plan (as described by campaign advisors) with CBO’s projected deficits shows that Senator Obama would start from a cumulative ten-year deficit (including debt service) of nearly $5.8 trillion and Senator McCain would open $7.4 trillion out of fiscal balance (see table). If we also take account of proposals launched in stump speeches, Obama’s deficit would slip slightly to $5.4 trillion (he’d raise Social Security taxes on high-income workers) and McCain’s would balloon to almost $11 trillion. That last number is 28 percent of federal outlays that CBO projects for the period.
It will be difficult for the new president to cut spending enough to offset the $2.3 trillion deficit that CBO projects. Cutting revenues as much as the candidates propose would make the task virtually impossible.