Research Report Today's Unsustainable Budget Policy: A Recount
C. Eugene Steuerle, Benjamin H. Harris, Caleb Quakenbush
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Although the recently passed American Taxpayer Relief Act instituted meaningful deficit reduction relative to previous policy, it still left the budget a far distance from any sustainable path. Under a plausible scenario, deficits never fall below 3.4 percent of GDP and rise to 5.4 percent of GDP by 2022. Given this baseline, an additional $150-$300 billion of annual deficit reduction, instituted after the economy has fully recovered, would put the budget on a stable path in the intermediate term while allowing for continued economic recovery. Yet even that path leaves longer-term budget problems unresolved. Without a more far-reaching agreement over such long-term issues, policymakers may have limited leeway to respond to new emergencies and meet the demographic pressures of the forthcoming decade.
Research Areas Taxes and budgets
Tags Federal budget and economy
Policy Centers Urban-Brookings Tax Policy Center