Trump’s budget would reduce deficit but wouldn’t balance like White House promised, CBO says
President Donald Trump’s budget would reduce the federal deficit — but it would not balance the budget over a decade as the White House promised, the nonpartisan Congressional Budget Office said Thursday.
Its report said that over a decade, the president’s proposed fiscal 2018 budget would reduce the cumulative deficit by one-third relative to the CBO’s baseline projection that assumes revenue and spending policies would stay largely unchanged. Debt as a percent of GDP would be an estimated 80 percent, 11 percent lower than under current projections, the CBO said.
The U.S. would run a budget deficit of $720 billion in 2027, versus the surplus that the White House projected under its policy, according to CBO estimates. The projection said Trump’s budget would make the deficit fall by $3.3 trillion from 2018 to 2027, a much lower reduction than what the White House promised.
When Office of Management and Budget Director Mick Mulvaney projected a balanced budget in 10 years, many skeptics raised concerns about the underlying calculations.
The CBO said reductions in deficits and debt would be achieved by the Trump administration’s significant cuts to mandatory and discretionary spending, largely driven a major drop in health-care outlays and cuts to military operations. The Trump administration has also promised massive corporate and income tax cuts to unlock economic growth, which it says will help to cover the lost revenue by lowering rates.
However, the CBO did not have the same optimism about revenues.
The CBO projects larger deficits than those estimated by the Trump administration because the White House projects higher revenue due to faster economic growth projections. Over the next decade, the CBO projects nominal GDP to be 6 percent lower than the White House does, while it expects revenues to be $3.6 trillion, or 8 percent, less than what the White House said.
Congress ultimately gets to approve a budget for Trump’s signature, which means many of the White House’s priorities may not end up in the final budget. The budget when released received heavy criticism from Democrats and some skepticism from Republicans over heavy cuts to domestic spending.
Mandatory federal spending on health care would drop by $1.9 trillion, or nearly 13 percent, over the next decade, according to the CBO. The biggest chunk of that would come from the Republican plan to replace Obamacare.
Other areas in which spending would drop include the Supplemental Nutrition Assistance Program and subsidies for student loans.