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A Project of The Annenberg Public Policy Center

Trump’s Budget Wouldn’t Erase Deficits, CBO Said

Under President Donald Trump’s proposed budget for fiscal year 2018, there would have been hundreds of billions of dollars in deficits each year from 2018 to 2027, according to projections from the nonpartisan Congressional Budget Office. That contradicts Acting White House Chief of Staff Mick Mulvaney’s claim that the U.S. “would actually be on a glide path to balancing the budget” had Congress enacted Trump’s desired plan.

CBO did say that deficits and debt would be lower under Trump’s plan than they would have otherwise been under law at the time. But, while the Office of Management and Budget projected that Trump’s budget would add $3.2 trillion to the deficit over that 10-year period, CBO estimated deficits would increase by $6.8 trillion. And, in 2027, when OMB projected there would actually be a $16 billion surplus, CBO estimated a $720 billion deficit.

Mulvaney, still the OMB director, made his claim on CNN’s “State of the Union” on Jan. 6. When the show’s host, Jake Tapper, said that former House Speaker Paul Ryan was frustrated the president “doesn’t show any political will or interest in doing anything that would reduce the deficit or the national debt, other than growing the economy,” Mulvaney claimed that Trump’s first budget proposal paved the way to a balanced budget.

Mulvaney, CNN’s “State of the Union,” Jan. 6: But maybe you should remind him the next time he tells you, that it’s the Congress that actually spends the money. If the Congress had adopted the president’s budgets over the last two years, we would not have the deficit that we have now, not have the debt that we have now, and would actually be on a glide path to balancing the budget, which is what our first budget did.

But the budget wouldn’t come close to being balanced, CBO said.

Trump’s OMB did estimate that his 2018 budget would reduce projected deficits by $5.6 trillion over 10 years. Trump’s plan to reduce spending, the administration said, would increase the deficit in 2018, but produce smaller deficits than there would have otherwise been each year from 2019 until 2026. Plus, there would be a budget surplus in 2027.

However, CBO, making different economic assumptions than OMB, including slower economic growth, reached a different conclusion. It said Trump’s plan increased deficits and debt less than current law would, but that the difference was not as much as OMB figured.

For example, CBO found the president’s budget would reduce projected deficits by $3.3 trillion over 10 years, but would still add a total of $6.8 trillion to the deficit in that time. (That’s a static estimate, not taking into account macroeconomic effects. CBO said that “economic feedback would further reduce the cumulative deficit between 2018 and 2027 by roughly $160 billion.”) OMB, on the other hand, estimated that Trump’s budget would increase the deficit by just $3.2 trillion over 10 years, or less than half of what CBO said.

More important, in 2027, when OMB said the budget would balance with a $16 billion surplus, CBO projected there would be a $720 billion deficit.

In other words, as the nonpartisan Committee for a Responsible Federal Budget explained: “Overall, CBO’s estimate shows that after adjusting for extremely rosy assumptions, and even after incorporating deep unspecified spending cuts, the President’s budget would fall well far short of balance, allow debt to rise from today’s levels, but nonetheless, reduce the debt significantly relative to current law.”

We’d also note that budget came out before Trump signed Republican-crafted legislation overhauling the tax code in December 2017. CBO estimates the Tax Cuts and Jobs Act will increase deficits by $1.9 trillion between 2018 and 2028.

As for Trump’s budget for fiscal 2019, CBO said it, too, would result in higher deficits and debt, though to a lesser degree than without Trump’s proposed policies.

“Compared with CBO’s baseline projections, the deficit under the President’s proposals would be smaller in every year between 2019 and 2028,” CBO said. “Over that period, the cumulative deficit would be $3.0 trillion smaller than the $12.4 trillion in CBO’s baseline,” and “[a]s a result of those smaller deficits, debt held by the public would also be smaller each year under the President’s proposals than under current law.”

Still, CBO projected that Trump’s budget would lead to a cumulative deficit of $9.4 trillion over the 2019–2028 period, and that federal debt held by the public would climb from 79 percent of gross domestic product in 2019 to 86 percent of GDP in 2028. It did not say the budget would balance.

Again, the Committee for a Responsible Federal Budget said: “CBO’s analysis shows that with realistic economic assumptions, even the President’s aggressive package of spending cuts would not be enough to prevent the debt from rising as a share of the economy nor to avoid the return of trillion-dollar deficits. Unfortunately, the recent tax cuts and spending bills have made an unsustainable fiscal situation even harder to bring under control, especially without major changes to Social Security, Medicare, defense, and the tax code.”

Even OMB said Trump’s fiscal 2019 budget would add more than $7 trillion to the deficit over 10 years, and it did not project the budget was on a path to being balanced.

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The U.S. “would actually be on a glide path to balancing the budget” had Congress enacted Trump’s 2018 plan.
CNN interview
Sunday, January 6, 2019