While President Bush pushed for a $750 billion tax cut, his administration tabled a Treasury Department report showing that the U.S. ?faces a future of chronic federal budget deficits totaling at least $44,200 billion,? according to Peronet Despeignes of the Financial Times. Commissioned by former Treasury Secretary Paul O?Neill to study the future impact of retiring Baby Boomers? pension and healthcare needs, the report concludes that ?sharp tax increases and massive spending cuts are unavoidable if the U.S. is to meet benefit promises to future generations.? Closing the deficit gap would require an ?immediate and permanent? across-the-board tax increase of 66 percent.
The study estimates that the current financial challenge facing Washington is approximately ?10 times the publicly held national debt, four years of U.S. economic output, or more than 94 percent of all U.S. household assets.? While Federal Reserve Chairman Alan Greenspan has criticized the government?s ?deafening? silence on the issue, an administration official referred to the study as a ?thought piece for internal discussion.?
In related news, the New York Times reports that a last-minute revision to the $350 billion tax cut bill Bush signed into law yesterday will prevent families earning between $10,500 and $26,625 from receiving the new $1,000 per child tax credit, as they do not pay income taxes.