CBO predicts larger budget deficits
By CQ Staff
President Obama’s fiscal 2012 budget would add $2 trillion more to the deficit over the next decade than the White House has claimed, the Congressional Budget Office said Friday.
In a preliminary analysis, the agency said the budget would ring up cumulative deficits of $9.5 trillion over the next 10 years if it were enacted, more than the $7.2 trillion estimated by the White House.
Obama proposed a fiscal 2012 budget last month that would spend $3.73 trillion next year and trim $1.1 trillion from the deficit over a decade.
One reason for the differing deficit projections, according to White House budget chief Jacob J. Lew, is that administration and CBO economic assumptions differ. Lew defended the White House’s assumptions that “the economy will fully recover after this recession as it has after previous ones,” in a blog posted on the Office of Management and Budget web site.
The difference is partly attributable to the CBO’s more conservative estimates of how quickly the U.S. economy will grow in coming years, which results in less tax revenue pouring into the Treasury. But Lew added, “There is large uncertainty in economic projections and differences of opinion when it comes to assessing individual policies.”
CBO cited two key reasons why it came up with higher deficit projections than the White House. Although the president’s budget would pay for the costs of not reducing payments to physicians who treat Medicare patients, the agency said the plan does not provide details about how to realize those savings. “Consequently, CBO did not estimate any savings for such future cuts,” the report said, a calculation that would add about $300 billion to the deficit.
The agency also does not recognize the administration’s proposal to raise $328 billion in new revenues to pay for transportation programs, since the budget proposal did not specify how those revenues would be raised.
Defending the Obama budget, Lew said if Congress did not agree on a new source of funding for transportation, the proposed spending would not go forward. “This way there would be no risk that this spending would add to the deficit,” he wrote.
Lew also took issue with CBO’s skepticism that the administration can pay for the “doc fix.”
“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,” Lew said.
The GOP pounced on the report. House Budget Chairman Paul D. Ryan, R-Wis., said the Obama budget proposal “continues to heap an unsustainable burden of debt on American families today and in the future.”
Ryan also charged that the 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.”
When the Obama budget was released, Lew boasted that it would reduce deficits to a level equal to 3 percent of gross domestic product by 2017, which he said meant that “the government will no longer be adding to our debts, and as a share of the economy, we’re going to stabilize the deficit.”
Under the CBO analysis, the deficit never drops below 4.1 percent of the economy, and thus does not reach primary balance.
In a bit of good news for the White House, CBO adjusted its previous deficit estimate downward. The agency projected the fiscal 2011 deficit will total $1.399 trillion, $81 billion less than its January estimate of $1.480 trillion. The agency said lower-than-expected spending was the main reason for the revision.
-- Paul M. Krawzak, CQ Staff
By CQ Staff
President Obama’s fiscal 2012 budget would add $2 trillion more to the deficit over the next decade than the White House has claimed, the Congressional Budget Office said Friday.
In a preliminary analysis, the agency said the budget would ring up cumulative deficits of $9.5 trillion over the next 10 years if it were enacted, more than the $7.2 trillion estimated by the White House.
Obama proposed a fiscal 2012 budget last month that would spend $3.73 trillion next year and trim $1.1 trillion from the deficit over a decade.
One reason for the differing deficit projections, according to White House budget chief Jacob J. Lew, is that administration and CBO economic assumptions differ. Lew defended the White House’s assumptions that “the economy will fully recover after this recession as it has after previous ones,” in a blog posted on the Office of Management and Budget web site.
The difference is partly attributable to the CBO’s more conservative estimates of how quickly the U.S. economy will grow in coming years, which results in less tax revenue pouring into the Treasury. But Lew added, “There is large uncertainty in economic projections and differences of opinion when it comes to assessing individual policies.”
CBO cited two key reasons why it came up with higher deficit projections than the White House. Although the president’s budget would pay for the costs of not reducing payments to physicians who treat Medicare patients, the agency said the plan does not provide details about how to realize those savings. “Consequently, CBO did not estimate any savings for such future cuts,” the report said, a calculation that would add about $300 billion to the deficit.
The agency also does not recognize the administration’s proposal to raise $328 billion in new revenues to pay for transportation programs, since the budget proposal did not specify how those revenues would be raised.
Defending the Obama budget, Lew said if Congress did not agree on a new source of funding for transportation, the proposed spending would not go forward. “This way there would be no risk that this spending would add to the deficit,” he wrote.
Lew also took issue with CBO’s skepticism that the administration can pay for the “doc fix.”
“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,” Lew said.
The GOP pounced on the report. House Budget Chairman Paul D. Ryan, R-Wis., said the Obama budget proposal “continues to heap an unsustainable burden of debt on American families today and in the future.”
Ryan also charged that the 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.”
When the Obama budget was released, Lew boasted that it would reduce deficits to a level equal to 3 percent of gross domestic product by 2017, which he said meant that “the government will no longer be adding to our debts, and as a share of the economy, we’re going to stabilize the deficit.”
Under the CBO analysis, the deficit never drops below 4.1 percent of the economy, and thus does not reach primary balance.
In a bit of good news for the White House, CBO adjusted its previous deficit estimate downward. The agency projected the fiscal 2011 deficit will total $1.399 trillion, $81 billion less than its January estimate of $1.480 trillion. The agency said lower-than-expected spending was the main reason for the revision.
-- Paul M. Krawzak, CQ Staff