As you requested, the Congressional Budget Office (CBO) has calculated the budgetary effects of an alternative policy scenario that would modify CBO's most recent baseline projections (released on January 26, 2010). As you also requested, we have computed the amount of additional revenues necessary, starting in 2019, to balance the budget in 2020 under that scenario.'
The lettr continues:
You asked CBO to assume the following changes to the assumptions underlying the baseline projections:
-- Extend the expiring tax provisions of EGTRRA and JGTRRA, except for those related to estate and gift taxes;
-- Make 2009 estate and gift tax law permanent;
-- Index the 2009 AMT exemption and income bracket amounts for inflation after 2009;
-- Assume war funding as specified in the President's proposed budget for fiscal year
The three changes to the tax policy assumptions are estimated to increase deficits relative to the baseline projections by $9 billion in 2010 and $3.4 trillion over the 2011-2020 period, mostly from lower revenues but also from increased outlays for refundable tax credits. Relative to baseline projections, CBO estimates that the alternative path for war funding would increase deficits by $24 billion in 2010 and $48 billion in 2011, but would reduce deficits each year thereafter through 2020, generating net reductions in deficits of about $700 billion over the 2011-2020 period.2 As a result of those alternative tax and spending assumptions, federal debt would be higher than in the baseline projection,adding an estimated $644billion for debt service to outlays from 2011 through 2020. All of the changes together would increase projected deficits by $33 billion in 2010 and $3.4 trillion over the 2011-2020 period, relative to baseline estimates.