The Congressional Budget Office said Friday that President Barack Obama’s tax and spending policies will yield $6.4 trillion in deficits over the next decade, more than double the shortfall in CBO’s own fiscal baseline — even after taking credit for reduced war costs.
House Republicans, slated to unveil their own plan next week, are sure to seize on the numbers, yet the mountain of data gives reason for both parties to pause going into what’s expected to be a major fiscal crisis after the November elections.
The GOP has been quick to fault Obama for excess spending. But more than three-quarters of the $3.5 trillion in added red ink can be explained by what is still a rich diet of tax breaks continued by the president — but not under the CBO’s baseline.
Indeed, in the case of discretionary appropriations, CBO scores the president as coming in about $4 billion under the $1.047 trillion target set by the Budget Control Act last summer. And within these confines, the biggest discrepancy is that his budget is $2 billion over the caps for security programs at the expense of domestic priorities.
Administration officials Friday took heart that CBO credited Obama’s plan with bringing future deficits down to 3 percent of GDP. In fact, the $6.4 trillion cumulative 10-year shortfall shown by CBO is under the $6.7 trillion forecast by the White House in its own documents in February. And measured against a rough proxy for current policy, the report lends at least partial support to the White House claim of up to $4 trillion in deficit reduction over 10 years.
“CBO found that by 2016 deficits as a share of the economy would be below 3 percent – a key milestone of fiscal sustainability,” said Jeff Zients, director of the Office of Management and Budget. “It found that after implementing the president’s budget, debt held by the public will decrease and then stabilize as a share of the economy, also a key indicator of improving fiscal health.”
But all these deficit reduction numbers come with some important caveats regarding how to treat hundreds of billions in war savings as well as automatic spending cuts due to take effect in January. And even if Obama were to get his way on all fronts, the outlook remains grim.
The federal debt held by the public would still nearly double again from $10.1 trillion at the end of 2011 to $18.8 trillion at the end of 2022. For the current fiscal year ending Sept. 30, CBO is now projecting a shortfall of $1.3 trillion. In fiscal 2013, the deficit will still hover near the $1 trillion mark — about $977 billion. And while it will fall to 2.5 percent of GDP by 2017, it then begins to grow again to 3 percent of GDP by 2022.
To be sure, CBO’s baseline isn’t perfect as a standard against which to measure fiscal decisions.
The nonpartisan office is bound by rules that require it to assume that all of the Bush-era tax cuts will end in December, for example. At the same time, it must build-in spending assumptions that major health programs like Medicare and Medicaid continue to grow unchecked.
House Budget Committee Chairman Paul Ryan (R-Wis.) is determined to bend this spending curve and shows every sign of wanting to renew his call next week for historic, long-range changes in both healthcare programs. At the same time, Republican presidential candidates are demanding still greater tax cuts than even former President George W. Bush envisioned and this complicates any hope of producing substantial deficit reduction.
For example, CBO estimates that Obama’s budget will cut revenues by $2.35 trillion below its baseline, but that assumes he also gets about $1 trillion in tax increases that many in the GOP oppose. Not counted in these totals is another $366 billion in refundable tax credits, which CBO scores as outlays on a separate table.
Altogether, in fact, the disparities between the CBO baseline and Obama’s budget on the spending side are much smaller. The administration appears to benefit from several technical assumptions used in the scoring, and CBO gives Obama $810 billion in credit for savings attributed to pulling troops out of Iraq and future reductions in Afghanistan.
At the same time the president is “charged” $979 billion for his budget’s assumption that across-the-board cuts can be forestalled in January. But even with this, the real added spending in his budget has more to do with interest on the mounting debt than any new initiative.
“Today’s analysis serves as a disappointing reminder of this administration’s broken promises and failed leadership when it comes to averting the most predictable economic crisis in our history,” Ryan said in response to the CBO numbers. “When it comes to our generation’s greatest challenges, the President refuses to take accountability or demonstrate much-needed leadership.”