What's Half a Trillion Dollars Among Friends?

Cross-posted from The Corner on National Review Online.

For those who see the Congressional Budget Office as the most accurate arbiter of future deficit projections, it’s worth noting that its latest projection for the 2011 budget deficit is $1.5 trillion, or 9.8 percent of GDP.

If you don’t find that number astounding on its own merits, note that total projected revenues for 2011 are $2.2 trillion. In other words, taxes would have to go up on every American by 66 percent, at projected levels of economic activity, in order to pay for our 2011 spending commitments, including interest on the debt.

What’s ironic is that last year, the CBO projected a 2011 budget deficit of just $980 billion. What’s a $500 billion, 50 percent error among friends?

UPDATE: Some are pointing out that the extension of the Bush tax cuts is responsible for a portion of the difference between the CBO's 2011 and 2012 estimates, which is a fair point. However: (1) only in part: the rest of the difference comes from spending growing faster than predicted and economic growth growing slower than predicted; (2) the CBO's static scoring system underestimates the impact of tax changes on economic growth, exaggerating the fiscal impact of the tax cut extension. Check out the links above for a detailed discussion.

UPDATE 2: See my follow-up post for an important correction.