(CNSNews.com) - If Congress allows current laws signed by President Barack Obama to stand and follows the fiscal path they have set for the next decade, federal tax revenues will rise to a record level as a percentage GDP, according to the Congressional Budget Office, but annual federal spending will also increase by 55 percent and continuous deficits will require Congress to lift the federal debt limit by another $4.25 trillion even as the government rakes in unprecedented tax revenue.
Under the so-called "fiscal cliff" scenario, in which all of the Bush tax cuts are allowed to expire and “sequestration” of some anticipated federal spending takes place, the federal government still will not balance its budget.
In the "baseline projections" published in its latest update on the budget and economic outlook for the period from 2012 to 2022, CBO assumes that “current law” will remain in place.
This current law includes no patch to spare the middle class from the Alternative Minimum Tax, no extension of the 2-point cut in the Social Security payroll tax, and the expiration of all the tax cuts enacted under President George W. Bush as of the first of the year. The current law also includes a deep cut in the fees that Medicare pays to physicians, the end of extended emergency unemployment benefits, and automatic “cuts” to previously anticipated defense and domestic spending starting after the end of the year as negotiated by President Barack Obama and House Speaker John Boehner in the deal they made to lift the debt limit by $2.4 trillion in August 2011.
With the tax increases scheduled to take effect under current law, federal tax revenue will climb to 21.4 percent of GDP by the beginning of 2022. According to the Office of Management and Budget, which has calculated historical federal tax revenue as a percentage of GDP back to 1930, that would be a record.
So far, there have been only three years since 1930 when federal tax revenues have gone as high as 20 percent of GDP. In 1944 and 1945, during World War II, they hit 20.9 percent and 20.4 percent; and, in 2000, they hit 20.6.
According to CBO’s estimates, federal tax revenues will increase as a percentage of GDP each year for the next decade, hitting a new record of 21.1 percent of GDP in 2020, then climbing to 21.2 percent in 2021, then 21.4 percent in 2022.
Despite this record level of taxation, federal spending will at all times outstrip federal revenue.
In 2012, according to CBO, federal spending was $3.563 trillion. Under current law, it will climb to $5.509 trillion in 2022. That is a $1.946 trillion increase in annual federal spending—or a jump of 55 percent.
Despite record-high federal revenues, the federal debt subject to the statutory limit will increase to $20.644 trillion by 2022, which is $4.25 trillion beyond the current debt limit of $16.394 trillion.
Thus, even with the largest tax hike in history and automatic spending “cuts,” Congress would still need to lift the debt limit by $4.25 so the executive branch could borrow the additional money to spend what the government would spend as the law now stands.