Federal fiscal trends in the second half of 2012
Editor’s note: The following is the first of a six-part series on government budgets and government spending that comprise the Keating Report mid-year 2012 forecast. The topics we are covering include: federal fiscal trends, state finances, local government fiscal realities, public works and transportation construction, public-private partnerships and economy and government purchases.
Federal revenues will reach $2.45 trillion in 2012 and will increase a little in 2013, reaching $2.96 trillion, according to the Congressional Budget Office‘s (CBO) March 2012 Baseline forecast. In 2014, CBO is predicting that federal revenues will exceed $3.2 trillion. In its updated projections, CBO is estimating that the federal budget deficit for fiscal year 2012 will reach $1.2 trillion.
On the spending side, federal government purchases of goods and services will total $1.22 trillion in 2012, according to Waltham, Mass.-based economic forecaster IHS Global Insight.
Congress and policymakers are facing difficult trade-offs as they formulate fiscal policies, especially with the tax increases and spending cuts that are due to kick in during 2013. “On the one hand, if the fiscal policies currently in place are continued in coming years, the revenues collected by the federal government will fall far short of federal spending, putting the budget on an unsustainable path. On the other hand, immediate spending cuts or tax increases would represent an added drag on the weak economic expansion,” says a recent CBO analysis.
Will Congress send the economy over a fiscal cliff and into a deeper recession? If Congress does not deal with a host of fiscal measures by Dec. 31, some $560 billion in drastic budget cuts and tax hikes (equal to about 5 percent of the U.S. gross domestic product) will result. The budget actions include cancelling all of the Bush-era tax cuts, cutting spending automatically in defense and non-defense programs, removing the alternative minimum tax fix, cancelling the payroll tax cut and ending the unemployment benefits extension. According to the CBO, if the tax hikes and spending cuts take place, the nation’s economic growth will be hobbled in the short term. Part 6 of this forecast has a few predictions.
- Federal government going for broke
- Studies say boosting taxes on high earners would not hurt economy
- Following correct processes is key on tracking government spending
- Putting a lid on improper government spending
- Preventing government spending that’s out of line
- Tools to prevent inappropriate government spending
- 2012 Keating Report on government budgets and spending
- Keating Report on government budgets and spending, 2nd half 2011
- 2011 Keating Report on government budgets and spending