Spending Is Outstripping Revenues, and It Only Gets Worse. The Bipartisan Commission on Entitlement and Tax Reform (chaired by Senators Kerrey and Danforth) said two years ago that the nation's spending commitments on entitlements "will lead to excessively high deficit and debt levels, unfairly burdening America's children and stifling standards of living for this and future generations." The commissioners could not agree on detailed recommendations, but they did agree on the facts shown in the chart that is reprinted below (which the Commission titled, "The Present Trend Is Not Sustainable"). As the Commission's chart shows, total revenues are projected to remain at about 19 percent of GDP; therefore, if we continue on our present course, entitlement spending and interest on the national debt will consume almost all revenues in 2010, and in 2030 all revenues will not even cover entitlement spending .[Chart Used available in SR-347]

Our Grandchildren Face Unbearable Tax Burdens. Today's accounting procedures often mask the impact on future generations of current policies. For example, if a current law promises to pay today's 40-year-olds a bonus when they reach age 70, that outlay would not be shown in this year's 5-year budget plan. In 30 years, however, that bonus will have to be paid and the cost will be borne by future taxpayers. To unmask the generational effects of present policies, economists have created a system called generational accounting, which makes it possible to estimate who will pay for all that government spends, whether next year or in three decades. The leading experts on generational accounting have calculated that taxpayers born in 1994 and thereafter will face an estimated lifetime net tax rate of 84 percent (see Table 1).

Table 1. Estimated Lifetime Net Tax Rates (in Percent) by Year of Birth

1900	1910	1920	1930	1940	1950	1960	1970	1980	1990	1994 & there after
24	27	29	30	31	33	34	34	34	34	84

Future Debts So Large That CBO Can't Compute Them. In its report to Congress of May 1996, the Congressional Budget Office devoted a chapter to the nation's long-term budget outlook. It projected the deficit and debt under three alternative budget strategies: permanently balancing the budget, stabilizing the ratio of debt to GDP, and continuing along our same course (the "base scenario"). This third course is outlined below; note that beginning in 2035, the burden of debt is so great that CBO couldn't compute the numbers (see Table 2).

Table 2. Projections of Deficit and Debt as a Percentage of GDP,

If Present Policies Continue (the "Base Scenario")

	1995	2000	2005	2010	2015	2020	2025	2030	2035	2040	2045	2050
Deficit	2.2	2.7	3.2	4.6	7.3	11.5	18.8	37.2	NC*	NC*	NC*	NC*
Debt	51.0	53.0	57.0	65.0	83.0	116.0	174.0	293.0	NC*	NC*	NC*	NC*

*NC = not computable

The fiscal problems of the next decades are massive. Congress can begin addressing them by passing the Balanced Budget Constitutional Amendment now.

[Notes on Sources: The quotation from A Christmas Carol has been edited slightly. The bar chart is from the Bipartisan Commission's Final Report to the President, p. 4 (Jan. 1995). Table 1 is taken from, Auerbach, Gokhale, & Kotlikoff, "Restoring Generational Balance in U.S. Fiscal Policy: What Will It Take?" Federal Reserve Bank of Cleveland, 31 Review 2-12 (1st Q. 1995), reprinted in CBO, The Economic and Budget Outlook: Fiscal Year 1997-2006, Table 4-6 (May, 1996). A lifetime net tax rate is the present value at birth of lifetime net taxes as a percentage of the present value at birth of lifetime labor income. Net taxes are combined taxes paid to all levels of government (excise taxes, property taxes, payroll taxes, income taxes, taxes on capital income) minus transfers received from government (Social Security, Medicare, Medicaid, SSI, AFDC or other welfare, food stamps, unemployment insurance, earned income tax credit). The views of the authors do not necessarily represent the views of CBO. (See also, CBO's Who Pays and When? An Assessment of Generational Accounting (Nov. 1995).) Table 2 also is taken from CBO's report of May, 1996, Table 4-7. The "Deficit" is the National Income & Product Account (NIPA) Deficit, and the "Debt" is Debt Held by the Public. The "Base Scenario" assumes that discretionary spending grows with the economy.]