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The Congressional Budget Office has scored President Trump’s first budget proposal. In its report, the CBO finds significant reductions in the U.S. government’s annual budget deficits compared to their baseline estimates, which reflect their projections of how those deficits would have grown if the spending policies of the Obama administration had continued on autopilot.
Here’s how the CBO’s analysts summarized the effects of President Trump’s proposals on the budget:
Compared with CBO’s baseline projections, the deficit under the President’s proposals would be slightly larger in 2018, about the same in 2019, and smaller in each year between 2020 and 2027, according to CBO and JCT’s estimates (see Figure 1). The cumulative deficit from 2018 through 2027 would be reduced by $3.3 trillion from the $10.1 trillion in CBO’s baseline. . . .
As a result of those smaller deficits, debt held by the public would also be lower under the President’s proposals than under current law. Federal debt held by the public would equal 77 percent of GDP this year and would hover around 80 percent for most of the 10-year period. That ratio would be lower—about 11 percentage points of GDP lower by 2027—than the amounts projected in the baseline (see Figure 2).
The following chart shows the CBO’s newest projections for the publicly held portion of the U.S. national debt.
These two charts represent the most positive assessment of the U.S. government’s fiscal outlook that the CBO has provided regarding both deficits and the national debt in over eight years.
There is a downside in the CBO’s analysis in that its projection of the future for the publicly held portion of the nation’s total public debt outstanding will require faster economic growth to achieve. Since economic growth is not something that can ever be dictated from Washington, D.C., that portion of the new projections is not guaranteed.
However, Washington, D.C., can dictate exactly how much the federal government will spend, where the president’s plan to slow the growth rate of that spending can most certainly achieve the CBO’s projections for the government’s reduced budget deficits.
The deficit reduction under the President’s proposals would stem from lower spending. The 10-year decrease of $4.2 trillion (or 8 percent) from amounts in CBO’s baseline would result from the following changes:
- A decrease of $2.0 trillion in mandatory spending (which is spending for programs generally governed by provisions of permanent law), including a $1.9 trillion reduction in spending for health care, as well as cuts to income security programs and student loans;
- A decrease of $1.9 trillion in discretionary outlays (which result from funding provided or controlled by annual appropriation acts) stemming from substantial reductions in nondefense discretionary spending and from sharply lower outlays for military operations and related activities in Afghanistan and elsewhere (known as overseas contingency operations, or OCO); and
- A decrease of $0.3 trillion in net interest costs because of lower deficits.
Outlays would average 20.7 percent of GDP from 2018 to 2027 under the President’s proposals. In CBO’s baseline, by contrast, outlays average 22.4 percent of GDP during that period. (Over the past 50 years, they have averaged 20.3 percent of GDP.)
The Trump budget could do more to ensure better outcomes for the U.S. government’s deficit and national debt by focusing on further restraining the growth rate of its spending to be lower than the growth rate of the nation’s economy.
After the past eight years, however, it’s nice to finally see CBO budget projections that don’t involve an exponential worsening of the U.S. government’s fiscal outlook.