Economix Blog: The Bush Tax Cuts and the Deficit

How much do the Bush tax cuts and the alternative minimum tax patch widen the deficit? Take a look at the lightest blue bars below:

Congressional Budget Office

That chart comes from the Congressional Budget Office’s latest report, released Wednesday, on the budget and the economic outlook.

CATHERINE RAMPELL

Dollars to doughnuts.

The office is legally required to provide estimates for the budget under current law; this is known as the forecast “baseline.” Every year, though, Congress reliably makes changes to current law — changes that increase the deficit — just in the nick of time. This bar chart is intended to illustrate exactly how big those last-minute changes are, lest onlookers be tempted to ignore them.

The lightest blue bars, labeled “Extend Tax Policies,” represent an estimate of how the deficit will grow if Congress extends the Bush tax cuts and indexes the alternative minimum tax for inflation, as legislators are expected to do once again. As you can see, these moves alone more than double the size of the deficit for most of the years shown.

Just above this are much darker blue bars, labeled “Maintain Medicare’s Payment Rates for Physicians.” These represent the expectation that Congress will continue to nullify their own requirements to cut Medicare payments for doctors. The law says that Medicare’s payment rates for physicians’ services will fall by 30 percent at the end of 2011, but given Washington’s record on this “doc fix,” few expect that cut to be allowed to happen.

“Additional Debt Service” — the aqua strips at the top — refers to the interest payments the government will have to pay because it will need to borrow more money to account for the greater budget shortfall caused by continuing these tax and Medicare policies.

Article source: http://feeds.nytimes.com/click.phdo?i=d2249ad9f5fd8ff965d47ba30c321291