CBO says Obama’s latest budget would add $3.5 trillion in deficits through 2022
By Erik Wasson – 03/16/12 10:09 AM ET
President Obama’s 2013 budget would add $3.5 trillion to annual deficits through 2022, according to a new estimate from the Congressional Budget Office (CBO).
It also would raise the deficit next year by $365 billion, according to the nonpartisan office.
The CBO estimate is in sharp contrast to White House claims last month that the Obama budget would reduce deficits by $3.2 trillion over the next decade.
The differences between the estimates from CBO and the White House budget office are attributable to different baselines and economic assumptions, and a big reason CBO expects the deficit to spike sharply under Obama’s budget is that CBO’s baseline assumes all the Bush-era tax rates will expire at the end of 2012.
Obama wants to continue the middle-class tax cuts, something reflected in his budget.
CBO also compares Obama’s budget to a different baseline in which the budget office assumes Congress and the administration decides to avoid big tax increases and deep spending cuts, something both branches have repeatedly done in the past.
In this scenario, for example, all of the Bush-era tax rates are extended and the Alternative Minimum Tax is “patched” to prevent it from falling on millions of middle-class taxpayers. In this comparison, Obama’s budget would actually reduce the deficit by $4.3 trillion through 2022.
White House acting budget director Jeff Zients wrote in a blog post that CBO’s report “confirms that the president has a balanced plan to reduce our budget deficits and put the country on a fiscally sustainable path.”
He notes that CBO said that by 2016 deficits would be below 3 percent as a share of the economy and that debt held by the public will decrease and then stabilize as a share of gross domestic product.
The $365 billion increase to the deficit in 2013 that CBO estimates would be caused by Obama’s budget is due to proposals that increase spending by $137 billion and that decrease revenue by $228 billion.
In total, the Obama budget spends $3.7 trillion next year and proposes generating $1.5 trillion from new taxes over ten years.
House Budget Committee Chairman Paul Ryan (R-Wis.), who will release his own budget next week, emphasized that the CBO estimates the deficit next year will be $977 billion, $76 billion more than Obama had projected.
“It confirms the president will not fulfill his promise to cut the deficit in half by the end of his first term — after four straight deficits in excess of $1 trillion, CBO estimates next year’s deficit will be even higher than the president claims,” Ryan said. “When it comes to our generation’s greatest challenges, the president refuses to take accountability or demonstrate much-needed leadership.”
Over ten years, CBO says the Obama budget contains $6.4 trillion in new deficits. That is better than the White House had predicted — it has foreseen new deficit of $6.7 trillion.
Obama’s budget would increase the size of the national debt held by the public from $10.1 trillion today to $18.8 trillion in 2022, according to CBO.
Under the CBO baseline, which assumess no change to current law, the debt would still rise, but only to $15.1 trillion by 2022.
According to CBO, the deficit will be $1.3 trillion in 2012 — the fourth straight year of trillion dollar deficits despite Obama’s promise to cut the deficit in half after his first term. The Obama budget would increase the deficit by $82 billion in fisceal year 2012, according to CBO’s estimate.
In addition to extending the Bush-era tax rates for the middle class, Obama’s budget also proposes to to limit the reach of the Alternative Minimum Tax and restore the estate and gift taxes to 2009 levels. Those tax changes alone reduce revenue and increase spending by $3.5 trillion over ten years.
CBO assumes that a 27 percent cut to Medicare physician payments will start to reduce expenses in January 2013, even though Congress regularly passes a “doc fix” to avoid this automatic payment cut. Because Obama proposes a “doc fix” that simply freezes payments at 2010 levels, his budget is scored as increasing deficits by $271 billion over ten years.