The Congressional Budget Office (CBO) released revised estimates of federal revenues and expenditures for the next 10 years on January 26. Federal revenues are now a smaller share of the U.S. economy than at any time since 1950, and that decline is a major cause of the $477 billion budget deficit CBO shows for fiscal year 2004. By fiscal year 2014, CBO projects that if the tax cuts enacted since 2001 are allowed to expire and federal spending rises with inflation, the deficit will disappear. If the tax cuts are extended, deficits will continue, adding up to about $1.9 trillion over the 10-year period, or $2.2 trillion when adding in the additional costs of borrowing.
It has been reported that in response to the growing deficit, the President’s budget will limit domestic discretionary programs to an average increase of 1 percent (less than inflation, which CBO estimates at from 2.0 – 2.5 percent annually over the next 10 years). But these programs are not the source of the deficit’s rise. Spending on domestic programs unrelated to homeland security has remained flat over the past two years. Even if these programs were frozen in FY 2005, according to House Appropriations Chairman C.W. Bill Young (R-FL), only $3 billion would be saved.

Additional Resources
CBO Budget and Economic Outlook: Fiscal Years 2005 – 2014
New York Times January 30 coverage of Chairman Young’s budget analysis
Center on Budget and Policy Priorities “CBO Figures Indicate Lower Revenues”

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