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America’s Defining Challenge: Will we leave the next generation with more opportunity?

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Washington, Jun 8, 2012 | comments
Chart 1

  • In March, CBO did an economic analysis of the House Republican budget – the Path to Prosperity (P2P).  That analysis showed that the P2P would increase the economy’s total output (as measured by GNP), relative to the baseline scenario, by as much as 1 percent in 2030, 3 percent in 2040 and a full 6 percent in 2050.

  • In contrast, CBO found that one version of the fiscal status quo – the so-called alternative fiscal scenario (AFS) in which current tax and spending policies are extended indefinitely into the future – would lead to a deterioration in the economy.  CBO estimated that the AFS would cause a decline in GNP of as much as 5 percent in 2023, 10 percent in 2030, and 28 percent in 2040.  CBO’s models were unable to estimate any economic impact past 2040 

  • HBC staff converted these discrete data points into a unified series of real GNP per capita – the standard economic proxy for “standard of living” – to illustrate what these two different fiscal paths might mean to the average person over time. 

  • The chart shows that real per capita GNP under the P2P would roughly double from $43,500 today to nearly $84,000 in 2050.     

  • In contrast, real GNP per capita under the AFS would start to plateau and then even decline in the early 2030’s. 

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