Economy & Business

The Corner

The CBO Scores Trump’s Budget

You can read the score here. The bottom line is that Trump’s budget would slash spending more than it cut revenues, reducing the deficit by about a third relative to current law during the 2018–2027 window.

That’s great, but bear in mind two things: (a) The gains are from spending cuts that will be difficult to pass, as we’re already seeing in the effort to repeal and replace Obamacare; (b) the score basically ignores the entire issue of tax reform, which could be a big budget-buster.

(As the report puts it, the budget’s tax reforms “lacked the specificity necessary to evaluate any effects,” so they “used as a placeholder the Administration’s estimate that the proposal would have no net budgetary effect.” That’s a prediction I will take seriously when outside organizations have confirmed it, for obvious reasons.)

Here are some of the major numbers, all referring to the ten-year budget window. Overall revenues would fall nearly $900 billion while outlays fell $4.2 trillion, for a net deficit reduction of $3.3 trillion. As of 2027, debt would be 80 percent of GDP, just a few points higher than it is today, instead of 91 percent, as under current law.

These estimates do not include the effects the budget would have on economic growth; they’d be slightly better, the CBO says, if they did. The Trump administration, by contrast, thinks the economic benefits of the plan would be so yuge they’d eliminate the entire deficit.

About $900 billion of the budget’s deficit reduction is from health-care reform (eliminating $1 trillion in Obamacare revenue but reducing federal spending on health care even more). Other major contributors are $240 billion in cuts to “income security” programs (primarily food stamps), $100 billion in cuts to student loans (which would be replaced by loans that are paid back based on the student’s income and forgiven after a set time), $750 billion in cuts to “overseas contingency operations” in “Afghanistan and elsewhere” (partly offset by $450 billion in other defense spending), and $1.5 trillion in cuts to “other nondefense” discretionary funding (such as agency budgets).

One final interesting tidbit: Though the budget pretends to boost infrastructure spending $200 billion, “The President’s proposals for discretionary spending would reduce appropriations for other accounts that provide funding for infrastructure, such as those for ground transportation and water resources. Those reductions would largely offset the proposed increase.”

 

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