The Congressional Budget Office released its analysis of the president's 2012 budget this afternoon, and its projections are even grimmer than the administration's. Using its own economic assumptions, the CBO projects that the president's budget would would lead to a 90 percent debt to GDP ratio in 2021, with deficits increasing through the last three years of the 10-year time frame to nearly 5 percent of GDP in 2021. The administration had projected the debt to be only about 80 percent of GDP by 2021, with deficits remaining closer to 3 percent of GDP.
A budget projected to result in a level of debt equal to 90 percent of GDP is more or less an unsustainable budget. The CBO's economic assumptions are not rosy as the administration's are, but the projections still hinge on the inclusion of a number of policies that aren't likely to happen, such as the cuts that Obamacare would make to Medicare. If, in between 2011 and 2021, the country went through another recession or was forced to rapidly increase defense spending, the level of debt could exceed the country's annual output quickly.
One aspect of the president's budget to keep in mind is that it includes the expiration of the Bush tax cuts for individuals making over $200,000 a year. In other words, the country's spending is unsustainable even if tax hikes on the wealthy are taken for granted.
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