Home / NEWS / White House budget wouldn’t eliminate deficit or do much to expand economy, CBO says

White House budget wouldn’t eliminate deficit or do much to expand economy, CBO says

The Congressional Budget Office said Thursday that President Trump’s first budget plan would not eliminate the deficit over 10 years or expand the economy at all by 2021, casting doubt on the administration’s controversial economic assumptions that were supposed to bolster key arguments for the White House’s agenda over the next year.

The CBO projected that the sweeping spending reductions on anti-poverty programs, housing, environmental protection and a number of other initiatives that the White House wants to cull back would still not be enough to eliminate the deficit by 2027.

In that year, the deficit would be $720 billion under the White House’s budget, the CBO said. The White House asserted the government would have a budget surplus in 2027 if its policies were enacted, bringing in more money through revenue than it spent. That’s a gap of more than $700 billion in just one year between the CBO and White House.

This contrasts sharply with the White House’s internal estimates, which argued that cutting taxes would create an economic boom that solved many of the country’s budget problems.

The White House also estimated that its budget changes would lead the economy to grow by 3 percent per year. The CBO found, however, that economic growth would average only 1.9 percent per year under the White House’s plan.

The assessment raises new questions about whether Republicans will be able to build a coalition of conservative and centrist lawmakers who can agree on a single budget proposal. By rejecting the White House’s declaration that large-scale spending reductions and unspecified tax cuts will lead to economic growth, the CBO could make it harder for this coalition of GOP lawmakers to band together. House lawmakers had hoped to begin voting on their budget plan as soon as next week.

Some key elements of the White House’s agenda rely on Congress’s ability to pass a budget. For example, only 50 Republicans are needed in the Senate to approve a tax plan if it is part of an already authorized budget plan, through a process known as reconciliation. If Congress doesn’t pass a budget plan, the Senate will need 60 votes to authorize tax cuts. There are only 52 Republicans in the 100-seat Senate, meaning they would have to cut deals with Democrats under this scenario.

 

The CBO’s new projections came with a significant caveat. It said the lack of detail the White House has provided about its plans — primarily its plan to overhaul the tax code — made it virtually impossible for the agency to determine what the economic impact of these ideas would be. The White House has put out only a sparse, one-page blueprint for overhauling the tax code, but it offered few details beyond saying that the changes would add trillions of dollars in new revenue to the budget because there would be so much future economic growth.

“The President’s proposals would affect the economy in a variety of ways,” the CBO wrote in its assessment. “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 effects or of the budgetary feedback that would result from those effects.”

If the CBO, which is run by a Republican appointee, raises questions about the lack of details in the White House’s tax plan now, it could serve as a warning to the White House and other Republicans as they try to design a more comprehensive plan in the coming months that is still expected to rely in large part on the assumption that the economy will grow markedly because of large tax cuts.

And there were cases where the CBO simply rejected the White House’s budget-cutting assumptions. For example, the White House said that “reducing improper payments governmentwide” would save $139 billion over 10 years, something it says would help to eventually eliminate the deficit. But the CBO said the White House simply wouldn’t provide enough details as to where it would find such improper payments to eliminate, and it discounted any savings from that endeavor.

Still, the CBO said the White House’s plan would essentially cut government spending by $4.2 trillion over 10 years compared with existing law, a very large sum.

The White House seized on this element of the CBO’s assessment in its initial response.

“We are thrilled that CBO confirms that the President’s proposed Budget resulted in the largest deficit reduction they have ever scored,” White House Office of Management and Budget spokeswoman Meghan Burris said. “CBO agrees that this is the largest deficit reduction package in American history. This Administration is committed to making the necessary investments to restore our military, secure our borders, and modernize our infrastructure.”

The CBO did not stipulate in its assessment that the White House’s plan would be the “largest deficit reduction package in American history,” as Burris stated. A CBO official said later that it did not do a historical analysis of the White House’s plan. Many Democrats and Republicans often cite the budget deal cut between the Clinton administration and Republicans in Congress as being the largest in recent decades, in part because it eliminated the deficit and created a budget surplus.

The CBO is a government agency that assesses the cost and impact of legislation, and the White House has repeatedly attacked its economic assumptions, even as recently as Wednesday.

By rejecting the White House’s budget and economic projections, the CBO could embolden Democrats who oppose the White House’s plans to cut spending and taxes. Many Democrats have argued that the Trump administration’s growth forecasts are flawed.

“The CBO report shows that the President built his budget on fantasy projections,” Rep. John Yarmuth (D-Ky.) said in a statement. “The facts are that Trump’s extreme proposals would severely underinvest in our families and communities, while at the same time give millionaires and corporations massive tax breaks.”

Trump came into office promising sweeping budget changes. He wanted to slash the size of government, roll back hundreds of regulations, reduce the size of the federal workforce and expand the military. A key component of his plan, though, would be to eliminate the budget deficit over 10 years. The deficit is the annual gap between spending and revenue, and annual deficits add to the government’s nearly $20 trillion federal debt.

But his budget writers also had major challenges in writing the budget. Trump instructed them that they could not cut benefits for Medicare or Social Security retirement, two of the largest parts of the budget. That forced OMB Director Mick Mulvaney to concentrate spending cuts elsewhere, and anti-poverty programs were among those to take the largest reductions.

The White House’s budget proposal was released in May, to set government spending levels for the year that begins Oct. 1. It essentially makes recommendations to Congress, which is responsible for drawing up the budget and appropriating funds to use. Congress often uses the White House’s budget proposal as a set of guidelines.

 


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