President Trump’s proposed budget for 2019 would result in significantly higher deficits over the next decade than the White House estimated, the Congressional Budget Office said Thursday. The difference comes partly from CBO’s belief that the tax bill signed into law last year will not create as much revenue as the White House has promised.
The administration said its budget proposal would lower the deficit by $5.2 trillion over 10 years. But the CBO said the Trump budget — which combines spending reductions on domestic programs with last year’s large tax cut package — would lower the deficit by $2.9 trillion. . . . CBO estimated the White House’s forecasts were overly rosy. Ultimately, it said tax revenue would be $1.2 trillion lower over the next 10 years, compared with the White House’s estimates.
Republicans insist the CBO is misguided (or maybe part of the Deep State?) — when a Democrat is not in the White House. The Republicans brushed aside debt concerns in passing a mammoth tax bill, which at best delivers a temporary, minor stimulus.
There are some fiscal conservatives left; they just aren’t in government. The Peter G. Peterson Foundation, a fiscal watchdog that regularly takes on both parties, slammed the administration:
CBO finds that the President’s proposals would make no significant improvement to our fiscal situation and rely heavily on unlikely spending cuts. Under the President’s priorities, interest would remain the fastest growing budget category, and our national debt would continue its upward trajectory.
“We’re clearly heading in the wrong direction, and it’s unfortunate that our leaders are not putting forward credible plans to improve our fiscal foundation. Policymakers should make sure that the country leaves opportunities – not insurmountable debt – for the next generation of Americans.”
Likewise, a new report from the Committee for a Responsible Federal Budget highlights the Trump administration’s fiscal sloth. “Debt under the President’s budget would rise from 78 percent of GDP at the end of this year to 86 percent by 2028 rather than falling to 73 percent of GDP as the White House estimates,” the report states. “Trillion-dollar deficits would emerge in 2022 and again in 2028 under CBO’s estimate of the President’s budget. Deficits would total $9.5 trillion over the next decade, $2.3 trillion higher than the Administration estimates. The President’s budget would reduce revenue by $615 billion and spending by $3.5 trillion relative to current law, with the largest spending cuts coming from health care and non-defense discretionary spending – including roughly $1 trillion of unspecified savings.” Because “unspecified savings” are highly unlikely to occur, the real results may be substantially worse: “Without those savings, debt would rise to roughly 90 percent of GDP by 2028.”
Unsurprisingly, the administration tried to skate by on unrealistic growth projections, a favored tactic of fiscal tricksters in both parties. The CRFB says, “OMB projects that real GDP will grow by an average of 3.0 percent annually from 2018 to 2028, while CBO projects a more realistic 1.8 percent.” The CBO projection is in line with “nearly all public and private estimates, whereas OMB’s are unlikely to materialize.”
The CRFB notes that there are some cuts in the president’s budget in discretionary spending, but to have a realistic, sustainable budget, we must look to “significant reforms to slow the rapid growth of Social Security and Medicare, new tax revenue, spending cuts,” as well as a comprehensive plan for growth. (This sounds a bit like the Simpson-Bowles Commission’s recommendations, which both parties rejected.)
Center-left economists argue that in a time when baby boomers are retiring, health-care costs are rising, we need infrastructure repair, and globalization has created severe economic dislocation and anxiety, we should be spending and taxing more. That is a policy debate worth having. How much government do we need, and how much can we have without choking growth? But so long as Republicans insist they can have all the government people want without paying for it, we are unlikely to reach consensus on a responsible set of fiscal policies.