Economic Survey: United States 2004: Ensuring fiscal sustainability and budgetary discipline
I. Â Â Â Â Â Â Â Â SUMMARY:
The federal budget has moved from a surplus of nearly 1½ per cent of GDP in fiscal year 2001 to a deficit of 3½ per cent in 2003 and a intercommunicate 4¼ to 4½ percent in 2004. This rapid adjust is attributable to sharply foreshortend tax receipts succeeding(a) the recession and the demise of the stock market bubble unite with tax cuts and the rapid expansion of defense, homeland security and other(a) discretionary outlays. While the cyclical drag on domain finances should fade soon, recent policy changes on both(prenominal) the revenue and outlay sides imply that, under realistic assumptions and rattlebrained corrective action, the deficit will remain substantial everywhere the next ten years by both US historical and international standards. At that time, the retirement of the baby roar generation will be in full swing, move enormous pressure on entitlement programmers.
Now that the recovery has taken hold, measures to reduce the deficit are urgently needed if the beneficial set up on long run national income from recent bare(a) tax rate cuts are not to be outweighed by the adverse consequences of the fall in public and national saving. These measures should end both at curbing outlays and, to the extent revenues have to be raised, broadening the tax base.
In its 2005, Budget the Administration proposes to halve the deficit by 2009 through unprecedented restraint on non-security expenditure. However, even if that objective were achieved, it might nonetheless not be ambitious enough in view of the Administrations intention to pee-pee the recent tax cuts permanent, its defense aspirations, the need to deal with the blow up numbers of taxpayers who will be subject to the Alternative negligible Tax and the serious demographic effects on entitlement outgo that would...
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