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.