NEW YORK (CNNMoney.com) –– If President Obama's 2011 budget were put
into effect as proposed, the U.S. federal government would add an
estimated $9.8 trillion to the country's accrued debt over the next
decade, according to a preliminary analysis from the Congressional
Budget Office.
Of that amount, an estimated $5.6 trillion will be in interest alone.
By
2020, the agency estimates debt held by the public would reach $20.3
trillion, or 90% of GDP. That's up from 53% of GDP in 2009.
Research
done by economists Kenneth Rogoff and Carmen Reinhart has shown that
such high levels of debt can cause a drag on economic growth.
The CBO cited two big contributors to the jump in debt.
One
is the president's proposal to extend the 2001 and 2003 tax cuts for
the majority of Americans. The other is the proposal to protect middle-
and upper-middle-income families from having to pay the Alternative
Minimum Tax (AMT).
Together those proposals would cost $3 trillion between 2011 and 2020.
"It
points out the unwillingness of the administration to raise the
revenues to pay for the size of government being proposed," said Robert
Bixby, executive director of the Concord Coalition, a deficit watchdog
group.
If Congress doesn't act, all of the Bush tax cuts are
slated to expire at the end of this year and there will be no
protection from the AMT.
But current law is not politically
realistic, many say. That's why the administration prefers to compare
the cost of its proposals to what lawmakers are likely to do –– namely,
extend tax cuts and fix the AMT.
Hence, the White House Budget
Office estimates that under the president's proposals, $8.5 trillion
would be added to the country's accrued debt over the next decade, or
$1.3 trillion less than the CBO estimate.
Either scenario is unsustainable, Bixby said.
The administration has also called the budget trajectory unsustainable and the president has created a
fiscal advisory commission to recommend ways lawmakers can get annual deficits down to 3% of GDP by 2015.
That's
well below where it would be under the president's budget, according to
estimates from both the CBO and the White House. And while his
proposals would chip away at deficits in the next few years, they start
to climb again thereafter. By 2020, the annual deficit as a percentage
of GDP will be 5.6%, according to the CBO. The White House estimates it
will be 4.2%.
But there is no guarantee the fiscal commission's recommendations will be adopted by lawmakers.
The
CBO notes that its estimates incorporate the Administration's revenue
and spending assumptions for policies such as health reform and climate
change, because the agency didn't have sufficient details from the
White House about those policies to do its own analysis.
A full analysis of the president's budget will be published later in the month, the CBO said.