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The deficits generated by Trump’s budget are much bigger than CBO’s estimates

Summary:
The figure below, from Senate Budget Committee staffer Bobby Kogan, shows four different estimates of projected budget deficits as shares of GDP: –The lowest line is the administration’s own estimate, showing how if you buy their numbers–and if you do, I’ve got a bridge to sell you–the budget balances by 2027. –The next line up is from today’s CBO release of their analysis of President’s budget. Note that CBO must adhere to claims that tax cuts will be paid for, even if there’s no credible plan to do so. –The next line is CBO’s baseline, or the path they believe the deficit will follow if we stick to current law. –The top line is the most important. It’s the deficit as a share of GDP under the far more credible assumption that team Trump fails to pay for their tax cuts (using Tax Policy

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The figure below, from Senate Budget Committee staffer Bobby Kogan, shows four different estimates of projected budget deficits as shares of GDP:

–The lowest line is the administration’s own estimate, showing how if you buy their numbers–and if you do, I’ve got a bridge to sell you–the budget balances by 2027.

–The next line up is from today’s CBO release of their analysis of President’s budget. Note that CBO must adhere to claims that tax cuts will be paid for, even if there’s no credible plan to do so.

–The next line is CBO’s baseline, or the path they believe the deficit will follow if we stick to current law.

–The top line is the most important. It’s the deficit as a share of GDP under the far more credible assumption that team Trump fails to pay for their tax cuts (using Tax Policy Center static estimates of the cost of their tax cuts, with interest costs added; ftr, TPC’s dynamic score line looks the same).

The deficits generated by Trump’s budget are much bigger than CBO’s estimates

Sources: OMB, CBO, TPC, Bobby Kogan

The administration gets to balance in part by assuming economic growth rates about 50% higher than CBO’s (~3 vs. ~2 percent), which spins off  over $3 trillion in revenue that the budget agency wisely does not count (the admin also cuts trillions in spending on programs like Medicaid, nutritional assistance, education, and income security). As mentioned, the CBO must follow the administration’s “set of principles to guide deficit-neutral reform of the tax system,” or what budget wonks call “the magic asterisk.” The claim is that they’ll figure out some way to offset the costs of their tax cuts, so no need to add those pesky costs to projected deficits.

If you share my “yeah, right” response to that claim, then the yellow line’s the one for you.

To be clear, I’m the least hawkish budget guy you’ll meet, and I don’t fault them or anyone else for failing to balance their budget. But deficits growing to 7% of GDP due to wasteful, regressive tax cuts are completely unwarranted and squander valuable resources that could and should be put to much better use offsetting the negative impacts of poverty, inequality, climate change, and the deterioration of our public goods.

Jared Bernstein
Jared Bernstein joined the Center on Budget and Policy Priorities in May 2011 as a Senior Fellow. From 2009 to 2011, Bernstein was the Chief Economist and Economic Adviser to Vice President Joe Biden, Executive Director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team. Prior to joining the Obama administration, Bernstein was a senior economist and the director of the Living Standards Program at the Economic Policy Institute, and between 1995 and 1996, he held the post of Deputy Chief Economist at the U.S. Department of Labor.

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