CBO: Obama Budget Understates Deficits
A report released Thursday by the nonpartisan Congressional Budget Office says President Barack Obama’s budget request would mean significantly larger budget deficits than the White House claims.
CBO says the budget plan proposed last month by Obama would produce deficits of $6.6 trillion over the next 10 years – $1.6 trillion more than the White House estimates.
The main reason is that the White House has a rosier estimate of the economy’s performance over the decade than CBO. That means the administration predicts higher tax revenues.
The president’s budget is just a proposal; it has gained little traction on Capitol Hill since its release last month. The GOP-controlled House and Democratic-led Senate have already settled on a spending “cap” for this year’s round of annual spending bills. A budget debate last week in the House was about political messaging and left intact last year’s small-bore congressional budget deal.
CBO also says Obama’s budget contains $1.4 trillion in tax increase over a decade, much more than claimed by the White House. A $456 billion chunk of that comes from higher revenues because of an influx of workers through immigration reform. CBO also notes that Obama’s budget contains $193 billion over a decade in new tax credits for the working poor that officially are counted as spending because they’re issued as refunds.
Obama also proposes steeper estate taxes, curbing tax deductions claimed by the wealthy and a 94-cent-per-pack increase in cigarette taxes. It proposes more money for infrastructure projects, education, job training and the Pentagon than permitted under automatic budget cuts known as sequestration. Those cuts are required because Congress failed to follow up on a 2011 budget and debt deal with significant further spending cuts that could undo the automatic cuts.
Obama’s budget claims to reduce cumulative deficits by $2.2 trillion over 10 years, predicting they would drop from $7.1 to $4.9 trillion.
CBO’s estimate says Obama’s budget, if enacted in its entirety, would only cut deficits by about $1 trillion over that period when compared with current law.
CBO produces independent studies and cost estimates of legislation for Congress.