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CBO: White House Budget Breaks the Debt Deal

Sunday March 18th, 2012   •   Posted by Craig Eyermann at 5:00pm PDT   •  

Last summer, President Obama and the leaders of the U.S. Congress reached a deal that would constrain the federal government’s discretionary spending (spending on things other than the mandatory spending to support Social Security, Medicare, Medicaid or to pay interest on the national debt). As documented by the White House itself, the deal which passed into law on 1 August 2011 would automatically force spending cuts to be split 50/50 between defense and other discretionary spending if the Congress and White House were unable to agree to a budget.

According to a recent analysis by the Congressional Budget Office, it appears that President Obama’s Fiscal Year 2013 budget represents an attempt to break that agreement.

Figure 1 from the CBO’ report illustrates the attempt to break the deal:

Figure 1: Deficits Projected in CBO's Baseline, Under the President's Budget, and Under an Alternative Fiscal Scenario

Here, it is important to note just what the CBO’s Baseline Projection represents. Budget expert James Kwak explains how the CBO calculates its extended baseline projection for the federal government’s budget:

To start off with, you have to understand what the “extended baseline scenario” — the top half of that picture — means. That’s pretty simple: it means under current law.

In the CBO’s baseline projection, it assumes that the federal goverment will follow the law exactly as it is currently written. Right now, that law includes the discretionary spending caps that were passed as part of the Budget Control Amendment of 2011.

Therefore, any deviation between the CBO’s analysis of the President’s newly proposed budget and the CBO’s baseline projection represents an attempt by President Obama to break the bipartisan agreement that avoided a shutdown of the federal government and a default on the national debt that was a real risk when the debt deal was reached.

Not that this action on the part of the President wasn’t predicted. It’s just a shame that it will have the following effect upon the publicly-held portion of the national debt (this is not the total public debt outstanding, which is much greater):

And the only reason that chart looks so good is because the President plans to raise taxes, a lot.

It’s just so much worse than the trajectory for the baseline projection because he plans to increase spending by even more.


Congressional Budget Office. An Analysis of the President’s 2013 Budget. [PDF document]. March 2012.

Kwak, James. Long-Term Budget Forecasts for Beginners. The Baseline Scenario. 5 July 2011.

Silverleib, Alan and Cohen, Tom. White House, congressional leaders reach debt deal. CNN. 31 July 2011.

U.S. House of Representatives. Text of Budget Control Act Amendment. [PDF document]. 1 August 2011.

White House. Fact Sheet: Bipartisan Debt Deal: A Win for the Economy and Budget Discipline.

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March 2012