President Barack Obama’s 2012 budget would produce $2.3 trillion more in deficits over the next decade than the administration projects, according to the Congressional Budget Office.
The nonpartisan agency said today the administration’s plan would generate $9.5 trillion in deficits between 2012 and 2021, compared with the $7.2 trillion forecast last month by the White House budget office.
The difference is partly attributable to the CBO’s more conservative estimates of how quickly the U.S. economy will grow in coming years, which results in less tax revenue pouring into the Treasury.
The CBO also declined to give the administration credit for more than $500 billion in savings it had counted in its budget from proposals to revamp the way the government finances highway construction as well as Medicare’s physician payment system. Both proposals were too vague to count, the budget agency said.
The CBO estimated that deficits under Obama’s 2012 spending plan wouldn’t shrink to less than 4.1 percent of the nation’s gross domestic product, a level economists generally consider to be unsustainably large. The administration projected deficits would shrink to as little as 2.9 percent of GDP.
The report also said the administration’s budget falls short of its goal of achieving “primary balance,” which refers to the government balancing its books except for interest payments on the debt. White House Budget Director Jacob Lew had called that a “key accomplishment” of its plan.
The report “exposes the widening gulf between the president’s rhetoric and his budget’s reality,” said House Budget Committee Chairman Paul Ryan, a Wisconsin Republican. “The president’s budget never reaches ‘primary balance,’ meaning that it fails to clear even the low bar the Administration set for itself in justifying its claims of sustainability.”
Lew said, “There is large uncertainly in economic projections and differences of opinion when it comes to assessing individual policies.” He said, “Regardless of our differences, CBO confirms what we already know: Current deficits are unacceptably high, and if we stay on our current course and do nothing, the fiscal situation will hurt our recovery and hamstring future growth.”
The annual report is designed to provide lawmakers with an independent assessment of the president’s budget request.
A stopgap measure signed into law earlier this month cutting $4 billion in the 2011 budget will save more than $40 billion over the next decade, the report said, by lowering the projected rise in discretionary spending as well as by reducing interest payments on the federal debt.