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U.S. deficit at record high and rising

The federal deficit hit $311 billion for the first half of fiscal year 2008, up from $162 billion the year before.

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Next year, the gap between Uncle Sam's income and outgo might increase even further. Costs for Iraq and Afghanistan will continue to mount, even if large numbers of troops begin to come home. Congress may rein in the disliked Alternative Minimum Tax, costing the government further revenue. A new president is likely to have new – possibly expensive – priorities. "It's not hard to come up with a $600 billion [fiscal 2009] deficit," says Mr. Collender.

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The degree to which parsimony is out of fashion in national politics perhaps can be seen in presumptive GOP nominee John McCain's April 15 speech on his economic proposals. Senator McCain emphasized tax reductions – he proposed eliminating the federal gas tax for the summer, for instance – and did not repeat his previous assurances that he'd balance the budget in his first term in office.

At an April 2 round table hosted by the Committee for a Responsible Federal Budget, McCain economic adviser Douglas Holtz-Eakin suggested that reducing the federal budget "is not an end in itself," according to a summary of the event published by CRFB. Rather than focusing on red ink, a president should talk about all the important issues related to the budget, including the need to protect US security and help American families, he said.

10,000 new retirees a day

Meanwhile, the baby boomers will become eligible for Social Security this year. That means the long-awaited tsunami of retirees washing into federal entitlement programs is almost upon the US. Over the next two decades, more than 80 million boomers will become eligible for Social Security and Medicare. That's about 10,000 people per day. By definition, spending for these programs is on auto-pilot. More beneficiaries means higher federal spending – much higher.

Due to entitlements, "without fundamental changes in our tax policy and our spending policy, deficits are going to grow from the rather benign levels that we've experienced in the last couple of years to levels that this nation has not experienced in peacetime," said Robert Reischauer, also a former CBO chief and president of the Urban Institute, at the Brookings symposium.

A bipartisan group of experts organized by Brookings and the Heritage Foundation recommends that Congress enact explicit long-term budgets for Medicare, Medicaid, and Social Security, and set limits on the automatic entitlement spending growth. Such action would force Congress to make trade-offs between entitlements and other fiscal priorities.

"What our proposal does is put those programs on the same playing field, if you like, as other programs," said Stuart Butler, vice president of domestic and economic studies at the Heritage Foundation. "There should be an orderly discussion about the commitment we make and how money is allocated and so on."