"If you have deficits like this, the debt just keeps rising and rising and rising relative to GDP," or gross domestic product, said Susan Hering, senior U.S. economist in Chicago for UBS, a financial services firm. "It's not a stable situation."
Higher budget deficits intensify the competition between the government and private borrowers, driving up interest rates, she said. "That means you crowd out private investment.... So voters should care," Hering said.
At this point, congressional accountants are slightly more optimistic about this year's deficit than their counterparts in the Bush administration. In July, the White House Office of Management and Budget estimated the deficit would reach $455 billion this year.
Independent budget experts say the size of this year's shortfall is less important than the long-term budgetary outlook. Although both presidential candidates state their intent to reduce the deficit as a percentage of the economy, neither one is offering a plan for putting the federal budget back in the black.
The CBO said it did not attempt to estimate the budgetary effect of Kerry's campaign proposals. The Democratic nominee wants to extend most of Bush's tax cuts for the middle class but rescind those for wealthier taxpayers. Yet several independent economists have said that any savings that would accrue would probably be offset by Kerry's proposals to increase spending on healthcare and education.
Robert Greenstein, director of the liberal Center for Budget and Policy Priorities, said it appeared that the 10-year cost of Bush's economic platform was slightly greater than the cost of Kerry's campaign promises. "But under both sets of proposals, the nation would face significant problems over the next 10 years and beyond," he said.
According to the CBO analysis, extending the Bush tax cuts that are scheduled to expire by 2011 would add $2.2 trillion to the 10-year budget deficit. Scaling back the alternative minimum tax, which is affecting an ever-bigger number of middle-class taxpayers, would cost another $425 billion under one reform scenario.
The alternative minimum tax was created to ensure that wealthy people did not escape income taxes entirely by claiming deductions, but the income level that triggers the tax was not indexed for inflation.
The CBO did not estimate the cost of partially privatizing Social Security, which Bush has endorsed in principle without offering a specific proposal.
