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Letter from Peter R. Orszag, Director to John M. Spratt Jr. regarding budgetary costs of the Economic Growth and Taxpayer Relief Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) compare to projected budget deficits for 2007 through 2011 1 (July 2007)

handle is hein.congrec/cbo10333 and id is 1 raw text is: CONGRESSIONAL BUDGET OFFICE Peter R. Orszag, Director U.S. Congress Washington, DC 20515 July 20, 2007 The Honorable John M. Spratt, Jr. Chairman Committee on the Budget U.S. House of Representatives Washington, DC 20515 Dear Mr. Chairman: In response to your letter of June 28, the Congressional Budget Office (CBO) has examined how the budgetary costs of the Economic Growth and Taxpayer Relief Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) compare to projected budget deficits for 2007 through 2011. Neither CBO nor the Joint Committee on Taxation (JCT) has a current estimate of the budgetary impacts of EGTRRA and JGTRRA. Therefore, the only readily available basis for such a comparison is the revenue effects of those laws as estimated by JCT at the time they were enacted. However, subsequent developments caused economic performance and other factors to differ from those upon which the projections were based. Consequently, if JCT were to make the same estimates today, the estimated revenue effects would be different. More fundamentally, measuring the actual impact of the revenue legislation requires gauging revenues and assessing economic performance in the absence of the legislation and then comparing those outcomes to the ones with the legislation. Such comparisons are difficult if not impossible to do, and the precise budgetary effects therefore typically can never be known with certainty. JCT estimated the revenue effects of EGTRRA and JGTRRA at the time the acts were considered in 2001 and 2003, respectively. Taken together, those estimates imply a loss of revenues totaling $165 billion in 2007. As you requested, CBO has calculated the debt-service costs that would result in 2007 from the legislation under an assumption that they were financed in full by additional debt rather than offset elsewhere in the budget. On that basis, CBO estimates that the revenue loss in JCT's projections would lead to additional debt-service costs of $46 billion in 2007, for a total budgetary cost of $211 billion. On the same basis, the agency estimates the total budgetary costs, including interest, for 2008 through 2011 to be $233 billion, $245 billion, $269 billion, and $215 billion, respectively. Most of the economic developments not anticipated in CBO's baseline that have occurred since the enactment of the tax legislation (and that were therefore not www.cbo.gov

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