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CBO Ups Fiscal Cliff Deal Costs To $4.6 Trillion

Tucked away at the Congressional Budget Office’s blog:

The “Fiscal Cliff” Deal

January 4, 2013

… Like all of CBO’s cost estimates, our estimate for [fiscal cliff] legislation shows the effects of the legislation relative to current law at the time we did the estimate. Relative to the laws in place at the end of 2012, we estimate that this legislation will reduce revenues and increase spending by a total of nearly $4.0 trillion over the 2013-2022 period…

From that perspective, why will the legislation increase deficits? Mostly because, under the laws previously in place, numerous tax provisions originally enacted in 2001, 2003, and 2009 would have expired. As a result, in 2013 personal income tax rates would have gone up for people at all income levels, the alternative minimum tax (AMT) would have applied to many more people, estate and gift taxes would have risen, and a number of other revenue-increasing changes in tax law would have taken effect. This legislation will prevent those changes in law from occurring or reduce their scope; hence, relative to what would have happened without the legislation, it embodies substantial tax cuts. The legislation also will boost deficits by increasing spending, mostly for refundable tax credits and unemployment compensation.

That dramatic widening of the budget deficit will increase interest payments on the federal debt, an impact that is not included in CBO’s cost estimates. The additional debt service will cost about $600 billion. Thus, if we added the estimated cost of the legislation and the related debt service to our previous baseline budget projections (which followed current law at the time), we would show additional deficits between 2013 and 2022 of roughly $4.6 trillion…

In other words, the math geniuses at the CBO ‘forgot’ that the government will have to borrow the money it uses to pay the interest on that federal deficit. And that means the ‘fiscal cliff’ deal will actually cost another $600 billion they had not figured on.

Which means that the $600 billion in new revenue that the tax increase on ‘the rich’ was supposed to generate — just got wiped out. It will not balance the budget after all.

Which just goes to show how truly puny $600 billion dollars is compared to our national deficit. It was literally overlooked by the accountants at the CBO. Which is just hilarious, if you like sick humor.

This article was posted by Steve Gilbert on Monday, January 7th, 2013. Comments are currently closed.

One Response to “CBO Ups Fiscal Cliff Deal Costs To $4.6 Trillion”

  1. MinnesotaRush

    Oh the drama! Oh the handwringing! Oh the gamesmanship!

    Fiscal Cliff Deal bull!

    Milton Friedman would probably tell us that anytime you spend more than you take in .. you’re headed off a Fiscal Cliff!

    How long we been doing this?

    Up next .. the debt ceiling charade!

    Good gawd!!!


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