CBO: Obama budget worse than projected on 10-year deficit

The Congressional Budget Office on Friday released its analysis of President Obama’s 2012 budget proposal and found it does less to rein in deficits and the debt than the administration had estimated.

CBO estimates Obama’s plan would produce 10 years of deficits totaling $9.5 trillion. By 2021, it would increase the debt held by the public to 87 percent of gross domestic product.

{mosads}The administration, using different methods, estimated budget deficits would total $7.2 trillion over the next 10 years under the 2012 budget. It forecast that total debt in 2021 would be 77 percent of GDP. 

The White House also said total deficits over the next decade would be $1.1 trillion more without the recommendations included in Obama’s budget.

Marc Goldwein, policy director for the Committee for a Responsible Federal Budget, said that CBO has found the effects to be almost nil.

He explained that the difference between the CBO’s $9.5 trillion estimate and OMB’s $7.2 trillion estimate comes from two sources: rosy economic growth assumptions by OMB and offsets for the Medicare doc fix as well as transportation spending OMB did not specify in the budget and which CBO will not factor in.

The most important aspect of CBO’s analysis is that, while OMB claimed the president’s budget “stabilized” the debt at 77 percent of GDP over the 10-year window, CBO estimates the debt will grow throughout the period and end up at 87 percent, he said.

CBO said the biggest reasons for the deficits, compared to the status quo, are the permanent extension of the Bush-era tax rates for the middle class and changes to the Alternative Minimum Tax that Obama favors in this budget. As a result of the tax policy, there is a $2.7 trillion net increase in the deficit over the next 10 years.

“The president’s other proposals would reduce the deficit, on balance, over 10 years,” the CBO concludes. 

For 2011, CBO concludes that “if all of the president’s budgetary proposals were enacted, they would add $26 billion to the baseline deficit for 2011. As a result, the 2011 deficit would total $1.43 trillion, or 9.5 percent of gross domestic product (GDP).”

Under the “doc fix,” Congress regularly suspends a requirement under law that payments to doctors from Medicare be massively reduced. So far, this has not been paid for, adding to the deficit.

White House budget director Jack Lew reacted to CBO’s estimate in a blog post Friday and offered a technical defense of the administration numbers.

He noted Obama has said that if an offset for the transportation spending was not identified, the administration “would not support making these investments.”

On the “doc fix,” he said the administration has outlined a way to pay for it for three years and believes that pattern will continue.

“With three years of the fix paid for, we believe that this establishes a pattern of practice – critically important in scoring policies — that strengthens our commitment to work with Congress on a permanent solution. Again, CBO chooses not to make this assumption.”

Lew also said the administration is right to assume robust growth of 4.3 percent GDP growth by 2014.

“It is our view that the economy will return to full strength, and that is a view shared by the Federal Reserve as well,” he wrote.

House Budget Committee Chairman Paul Ryan (R-Wis.) said the CBO estimate “exposes the widening gulf between the President’s rhetoric and his budget’s reality.”

“Simply put, the President’s budget spends too much, taxes too much, and borrows too much – and it continues to heap an unsustainable burden of debt on American families, today and in the future,” he said. “The President’s budget never reaches ‘primary balance,’ meaning that it fails to clear even the low bar the Administration set for itself in justifying its claims of sustainability.”

Senate Finance Committee Ranking Member Orrin Hatch (R-Utah) said, “Even using their own estimates, the Administration couldn’t hide how bad our nation’s deficit and debt are, but today CBO has 100 percent proven that the President’s budget is nothing but an air ball.”

This post was last updated at 3:34 p.m.

Tags Jack Lew Orrin Hatch Paul Ryan
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