(CNSNews.com) - The Congressional Budget Office released an analysis today that concludes that President Donald Trump’s 2018 budget proposal would cut the cumulative federal deficit by $3.3 trillion over the next ten years, but that even with that massive cut in the deficit the federal government would still run $6.8 trillion in the red during that period.
Under current law, CBO projects the federal government will run a $10.112 trillion cumulative deficit in the next ten years—averaging more than $1 trillion per year.
Under Trump’s plan, CBO projects the cumulative ten-year deficit would be $6.836 trillion.
Thus, the Trump ten-year deficit, according to CBO, would be $3.276 trillion less than the ten-year deficit under current law.
The White House Office of Management and Budget’s analysis of President Trump’s 2018 budget proposal estimates that it will result in a dramatically different outcome for the federal deficit.
In the OMB analysis, the cumulative ten-year deficit under the Trump budget is $3.150 trillion—or $6.962 trillion less than the CBO’s $10.112 baseline and $3.686 trillion less than the $6.836 trillion ten-year deficit the CBO attributed to the Trump budget.
Also, in the OMB’s analysis (see Table S-1 from the president's budget below), Trump’s budget would eventually balance, running a $16 billion surplus in fiscal 2027. The CBO estimates that, under the Trump budget, the federal government would run a $720 billion deficit in fiscal 2027.
“The cumulative deficit from 2018 through 2027 would be reduced by $3.3 trillion from the $10.1 trillion in the CBO’s baseline,” says the CBO analysis.
“According to CBO’s estimates, the deficit would fall from the $693 billion projected for 2017 to $593 billion in 32018 under the president’s proposals,” the analysis says. “After that, the deficit would generally rise, totaling $720 billion in 2027.
“The cumulative deficit over the 2018-2027 period would total $6.8 trillion,” says the CBO analysis.
The CBO does credit the president’s budget with reducing the projected future increases in both discretionary and mandatory federal spending.
“The deficit reduction under the president’s proposals would stem from lower spending,” says the analysis. “The 10-year decrease of $4.2 trillion (or 8 percent) from amounts in the 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 and student loans; a decreased of $1.9 trillion in discretionary outlays (which result from funding provided or controlled by annual appropriations 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 of OCO); and a decrease of $0.3 trillion in net interest costs because of lower deficits.”
The CBO credits the Trump budget with saving $141 billion over ten years by making cuts in the food stamp program—or “Supplemental Nutrition Assistance Program.”
It also credits the Trump budget with saving $55 billion by making cuts to “benefits for federal civilian employees.”
The CBO also says Trump’s budget would save $25 billion by denying the earned income or child tax credits to people who do not have a Social Security Number that authorizes them to work in the United States.
The CBO says that one reasons its estimates of the impact of the president’s budget differ from White House estimates is because the CBO does not take into account all of the “macroeconomic effects” that changes in federal taxing, spending and regulation might have.
“In their analysis of the president’s budget, CBO and JCT [Joint Committee on Taxation] generally produce detailed ‘conventional’ estimates of the president’s proposals for individual provisions—as well as for the deficit and the debt—that exclude any feedback from the macroeconomic effects; the agencies also produce ‘dynamic’ estimates that include economic feedback effects on the budget for the set of proposals as a whole.”
“The president’s proposals would affect the economy in a number of ways,” says the CBO analysis, “however, because the details on many of the proposed policies are not available at this time, CBO cannot provide an analysis of all their macroeconomic effect or of the budgetary feedback that would result from those effects. CBO did examine the effects of the reduction in deficits that would stem from the president’s policies (to the extent that CBO and JCT could estimate their budgetary effects). Those estimated macroeconomic effects exclude effects from changes in people’s incentives to work and save and from changes in productivity, which would depend on those details.”
In the update to its Budget and Economic Outlook that it published in June, CBO said that under current law “economic growth is projected to settle at 1.9 percent.”
Specifically, CBO projected that under current law growth in real GDP would be 2.1 percent this year and 2.2 percent in 2018, and would average 1.6 percent in 2019 and 2020, and would average 1.9 percent from 2021 to 2027.
That last time real GDP grew by 3.0 percent or more in the United States was in 2005, when it grew by 3.3 percent. Since then, the greatest annual growth in real GDP was the 2.7 percent in hit in 2006.