CBO Scores Trump Budget Shrinking US Deficit By Half By 2027

There's good news.. and bad news. CBO has just released its 'score' of President Trump's proposed budget, noting that the plan would shrink the deficit by a half from their baseline by 2017 (good news). However, even accepting Trump's dynamic scoring and 5% growth expectations, CBO is unable to balance the budget and Yellen's recent "US debt is unsustainable" warning seems ever more prescient.

Trump's budget would shrink notably from the CBO baseline...

According to CBO’s estimates, the deficit would fall from the $693 billion projected for 2017 to $593 billion in 2018 under the President’s proposals. After that, the deficit would generally rise, totaling $720 billion in 2027. The cumulative deficit over the 2018–2027 period would total $6.8 trillion. 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. (The average deficit over the past 50?years has equaled 2.8 percent of GDP.) Those estimates exclude any macroeconomic feedback effects.

This is still a big deficit, and coming a day after Janet Yellen warned that the US debt situation was unsustainable, it seems more prescient than ever to focus on spending cuts.

There is some other good news (if you buy it). By the end of the coming decade, debt held by the public would total 80 percent of GDP: 11 percentage points below the debt-to-GDP ratio projected in CBO's baseline.

But as CBO notes, this is due to the adminstration's hopeful growth estimates...

"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"

The deficit reduction under the President’s proposals would stem from lower spending.

The 10-year decrease of $4.2 trillion (or 8 percent) from amounts in CBO’s baseline would result from the following changes:

A decrease of $2.0 trillion in mandatory spending (which is spending for programs generally governed by provisions of permanent law), including a $1.9 trillion reduction in spending for health care, as well as cuts to income security programs and student loans;

 

A decrease of $1.9 trillion in discretionary outlays (which result from funding provided or controlled by annual appropriation acts) stemming from substantial reductions in nondefense discretionary spending and from sharply lower outlays for military operations and related activities in Afghanistan and elsewhere (known as overseas contingency operations, or OCO); and

 

A decrease of $0.3 trillion in net interest costs because of lower deficits.

In total:

Outlays would average 20.7 percent of GDP from 2018 to 2027 under the President’s proposals. In CBO’s baseline, by contrast, outlays average 22.4 percent of GDP during that period. (Over the past 50 years, they have averaged 20.3 percent of GDP.)

And finally regarding tax reform and deficit-neutral discussions:

The budget also contains a proposal for deficit-neutral tax reform.

 

That proposal lacked the specificity necessary to evaluate any effects from such a change.

 

For that reason, CBO and JCT used as a placeholder the Administration’s estimate that the proposal would have no net budgetary effect.

Full CBO Report below...

Comments

Pairadimes American Psycho Thu, 07/13/2017 - 11:41 Permalink

The kind of budget changes that would save the Republic are currently politically impossible. They would leave the majority of DC politicians banging their sippy cups on their tray tables.You know those people in your life who can't seem to make the right decisions? You watch what they are doing, and you say to yourself, "this won't end well", and damned if you aren't right? Well, in a democracy, these are the people who basically control the national agenda. The ones who don't have a handle on how invisible things like economies and political networks and oligarchies and currencies work.They wind up being the perfect allies of TPTB, right up until the greedy bastards kill the goose that laid their golden egg by driving the lemmings over the proverbial cliff of systemic collapse.Stupid bastards.

In reply to by American Psycho

Anteater Anon2017 Thu, 07/13/2017 - 12:26 Permalink

With Deep State's own George HW Bush in power under smooth-talking doddering old Ronald Reagan, the die was cast for End Times America. The PC-Net booms of Clinton Years were already targeted by the Gramm-Leich-Blileys under Mr Read My Lips, then the stake driven through the American Dream by Gingrich's Contract on America, and Mossad's Blue Dress.After that it was all just Israelis dancing on rooftops, $147 oil, irrational exhuberance, TBTF, QEn and ZIRP/NIRP.We're today in the 'expectation management' phase of the Titanic. Return to your cabins, and wait for the MAGA!Sad.

In reply to by Anon2017

Bryan Thu, 07/13/2017 - 11:33 Permalink

Deficits don't matter when the printing press is running freely and the can is being kicked down the road.  I don't see that changing any time soon.

Chris88 Thu, 07/13/2017 - 11:36 Permalink

Adding to the debt not as fast as the last retard, doing nothing to address US bankruptcy (entitlements) just like the last retard.  Wow, what a change.

skunzie Thu, 07/13/2017 - 11:37 Permalink

Make me President and I'll eliminate the deficit in under four years.  Shut down the federal government, cut all subsidies to every country, close most of our foreign military bases, end our endless made up wars, spend less than we take in, and end the ongoing raids on SS.

order66 Thu, 07/13/2017 - 11:41 Permalink

Pointless because the inevitable trillions in spending to save another collapsed economy will undo all of this. As will the next President - who is very likely to be Democrat.

GodHelpAmerica (not verified) Thu, 07/13/2017 - 11:50 Permalink

The US government is the largest source of "economic growth"--you cut government spending short term and you dramatically cut growth. They cannot cut the deficit. without making it more difficult to pay back the debt! The economy is already broken and stuck in infinite, exponential debt growth (currency creation) until a new system is forced upon us.

To Hell In A H… Thu, 07/13/2017 - 11:49 Permalink

Oh please. Anybody believing this bovine manure, passing itself off as a story, has a lower IQ than a dindu with brain injury. I know ZH, has slacked off with the in-depth economic analysis, in favour of click-bait articles, but still? It's either war, or a massive reset favouring the west, with our new rules, enforced by "men with guns" as Krugman so crudely puts this reality. 

Anteater To Hell In A H… Thu, 07/13/2017 - 12:11 Permalink

Congress is right now running a -$1.1T budget shortfall deficit, did the Senate hush that through at midnight so CBO wouldn't see? And another -$1.5 T shortfall by October!  We're 110% of faked GDP in debt, and this chart porn is saying it will increase between -3-5% every year, so that by 2027, best case, we'll be 140% of GDP in debt, and have blown past the new -$30T national debt ceiling sometime during the early Roaring Twenties.Good luck finding another country to flee to! Thanks to the Israel First Neocons, not even Israel will take Americans in.

In reply to by To Hell In A H…

Quivering Lip Thu, 07/13/2017 - 12:05 Permalink

 a $1.9 trillion reduction in spending for health care, as well as cuts to income security programs and student loans.Yep a reduction in healthcare as first boomers hit their 80's in 2025! 

John Law Lives Thu, 07/13/2017 - 12:25 Permalink

"...it seems more prescient than ever to focus on spending cuts."Therein lies the rub.  What elected Congressman or Senator will publicly support spending cuts that impact their own constituents?  Good luck with that.FUBAR.

Too-Big-to-Bail (not verified) Thu, 07/13/2017 - 12:43 Permalink

eventually the debt will become meaningless, since the money/debt was all created out of thin air anyway..... If the government owes the banks tens of millions of dollars, it's the government's problemIf government owes the banks tens of trillions of dollars, it's the banks' problem