If Congress allows current laws signed by President Barack Obama to stand and follows the fiscal path they have set for the next decade, federal tax revenues will rise to a record level as a percentage GDP, according to the Congressional Budget Office, but annual federal spending will also increase by 55 percent and continuous deficits will require Congress to lift the federal debt limit by another $4.25 trillion even as the government rakes in unprecedented tax revenue.
Under the so-called “fiscal cliff” scenario, in which all of the Bush tax cuts are allowed to expire and “sequestration” of some anticipated federal spending takes place, the federal government still will not balance its budget.
In the “baseline projections” published in its latest update on the budget and economic outlook for the period from 2012 to 2022, CBO assumes that “current law” will remain in place.
This current law includes no patch to spare the middle class from the Alternative Minimum Tax, no extension of the 2-point cut in the Social Security payroll tax, and the expiration of all the tax cuts enacted under President George W. Bush as of the first of the year. The current law also includes a deep cut in the fees that Medicare pays to physicians, the end of extended emergency unemployment benefits, and automatic “cuts” to previously anticipated defense and domestic spending starting after the end of the year as negotiated by President Barack Obama and House Speaker John Boehner in the deal they made to lift the debt limit by $2.4 trillion in August 2011.
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