The Congressional Budget Office (CBO) has released its first analysis of President Trump’s proposed 2018 budget and it is worth noting that CBO could not provide a comprehensive analysis of the effects of the proposed policies in the President’s budget because many of them do not contain the details necessary to assess those effects.
Throughout its analysis of the President’s 2018 budget, CBO indicated:
“The President’s proposals would affect the economy in a variety of ways; 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.”
Unfortunately, this is not surprising as we’ve previously reported that the President’s initial budget omitted 85% of details that previous administrations have included.
CBO’s analysis also shows that even though President Trump has proposed to cut spending by $4.2 trillion over the next ten years the deficit would generally rise each year under the President’s budget, totaling $720 billion in 2027. The cumulative deficit over the 2018–2027 period would total $6.8 trillion. In other words, the President’s drastic budget cuts to critical programs that various communities and families across the country and here in North Carolina depend on to thrive will not solve the federal debt issue.
CBO is not blunt in calling out the President’s incoherent budget a disappointing mix of unrealistic assumptions, gimmicks and punts, but points out in a restrained way that:
The deficits that CBO estimates would occur under the President’s proposals are larger than those estimated by the Administration. Nearly all of that difference arises because the Administration projects higher revenue collections—stemming mainly from a projection of faster economic growth.
Based on CBO’s analysis it is clear the President’s budget is not a real blueprint that would help America. A credible and strategic budget would at least contain details for proposed policies, would improve the debt issue in the long-term, and would be based on credible economic assumptions.
Below are other key points from CBO’s latest report:
Effect on the federal budget
Over the 2018–2027 period, mandatory spending would be $2.0 trillion (or 6 percent) lower than current law under the President’s proposals. Nondefense discretionary spending would see a decrease of $1.9 trillion due to substantial reductions in various programs.
- The Administration’s proposals would reduce mandatory federal spending for health care by $1.9 trillion (or nearly 13 percent) over the coming decade.
- The President’s proposals would decrease income security programs by $238 billion over the coming decade. The proposals to reduce spending for the Supplemental Nutrition Assistance Program (SNAP) would have the largest effects, decreasing mandatory outlays by $141 billion (or 21 percent) between 2018 and 2027.
- Reduce Subsidies for Student Loans: The President’s proposals would generate savings to the government from student loans of $100 billion between 2018 and 2027. For borrowers who take out their first student loans beginning in academic year 2018–2019, the proposals would eliminate the subsidized loan program. Under that program, borrowers accrue no interest on their loans while in school, in the six-month grace period after school ends, or in other authorized deferment periods.
Effect on the Federal Debt
Federal debt held by the public would equal 77 percent of GDP this year and would hover around 80 percent for most of the 10-year period…Measured as a percentage of output, the deficit would decline from 3.6 percent of GDP in 2017 to 2.6 percent at the end of the period. The deficit would average 2.9 percent through 2027. (Note: The average deficit over the past 50 ?years has equaled 2.8 percent of GDP.)
Effect on the Economy
From 2018 to 2022, the reductions in deficits under the President’s proposals would dampen overall demand for goods and services, offsetting the effects of greater national saving. As a result, CBO estimates, the economic effects from decreases in deficits and the feedback into the budget would be negligible, on net, during that period.
Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.