President Obama released his 2014 budget today, which lays out spending and revenue projections over the next ten years. With the chart via the Washington Post, here’s how they compare with the other 2014 budgets we’ve seen
(On their site, the graphic is interactive.)
The president’s proposed budget leaves us with a higher level of debt in 2023 than either the Senate Democrats’ or the Congressional Progressive Caucus’s did. If you’re wondering how the Progressive Caucus beat out the New Party man in terms of deficit reduction, the latter increases non-defense discretionary spending significantly more than anyone else’s budget, but it also imposes much larger tax hikes than the president or Senate Democrats do.
The president’s budget repeatedly boasts of reducing deficits over the next ten years by $1.8 trillion, which is true by a certain definition, but as you can see from the above chart, it’s much less impressive than it sounds, because current policy includes the implementation of sequestration’s $1.2 trillion in cuts over the next ten years (the deficit-reduction totals in the House and Senate budgets, $4.6 trillion and $1.85 trillion respectively, also, roughly speaking, count sequestration cuts). In reality, then, the president’s budget only reduces the ten-year deficit by about $600 billion, relative to what would happen if government just continued its current policies.
The president’s plan replaces sequestration by maintaining small discretionary domestic and defense cuts over the next ten years, implements what probably adds up to almost a trillion dollars in tax increases, and implementing some cuts to health-care entitlements, Social Security, and other mandatory spending toward the end of the ten-year budget window.
After those ten years? It’s worse. As Jim Pethokoukis pointed out over at AEI, they offer two projections of where Obama’s budget leaves us in the long term. One looks great:
By 2085, we could practically buy China! But that’s based on the assumption that the budget policies implemented in 2014 remain locked in like that, which the White House admits isn’t realistic, so it provides another set of long-term assumptions, which are much more likely, and look a lot more like the CBO’s baseline. You end up with permanent, large deficits:
Everlasting deficits of 5 percent of GDP don’t just mean that the debt grows in dollar terms — it’s going to be growing at a decent clip as a share of the economy, too, the better measure of a country’s indebtedness. Pethokoukis points out that in the 2013 budget, the White House included a chart showing what the more realistic projection looked like — the debt shot steadily upward. That’s exactly what would happen here — running deficits of 5 percent of GDP, at 2–3 percent real GDP growth, means that debt would reach 200 percent of GDP comfortably before 2080.