ABSTRACT

Sustainable Budget Deficit: Overview of Major Expiring Policies in 2011 and 2012 and Their Budgetary Impact [December 16, 2011]   [open pdf - 294KB]

"The federal government runs a deficit when spending (mandatory, discretionary, and interest payments on the debt) is greater than revenues (taxes and fees). Between 2009 and 2011, deficits relative to the size of the economy (i.e., as a percentage of gross domestic product (GDP)) have been at their highest levels in the post-World War II era. In 2011, the federal deficit was 8.5% of GDP, while from 1946 to 2008, the budget deficit averaged 1.7% of GDP. Many experts believe that deficits must be reduced to 'sustainable' levels in order to avoid a budgetary crisis. Large budget deficits can result in a budgetary crisis for two principal reasons. First, as deficits persist, government incurs debt and as a nation's debt grows, so too would interest payments on that debt, limiting spending on other parts of the budget. Second, increasing deficits and debt could also trigger fear among creditors about a government's ability to repay its debts, resulting in an unwillingness by creditors to lend at affordable rates. […] This report compares the budgetary implication of allowing all the policies to expire versus extending all of them in order to show their impact on the medium-term deficit. In the past, when these policies have been extended, they have generally not been offset. This report assumes that future extensions would also not be offset. This report first examines six major policies that are scheduled to expire in 2011 and 2012 and the deficit implications of their extension. Then the report provides data on the annual and aggregate budget implications of extending these major policies."

Report Number:
CRS Report for Congress, R42117
Author:
Publisher:
Date:
2011-12-16
Copyright:
Public Domain
Retrieved From:
Via E-mail
Format:
pdf
Media Type:
application/pdf
URL:
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