CBO Releases Its Own Estimate of the President's Budget

The Congressional Budget Office (CBO) released its estimate of the President's budget today. The estimate shows, perhaps unsurprisingly, a much worse picture than the Office of Management and Budget's (OMB) own estimates.

OMB projected debt would reach 60 percent of Gross Domestic Product (GDP) in 2027 with a balanced budget in that year. CBO finds that under the President's budget, debt would rise from its current level of 77 percent of GDP to 80 percent by 2027 with a $720 billion deficit in 2027. Even if CBO finds the President's budget has much less deficit reduction, the budget would still represent an improvement from CBO's current law baseline, which shows debt reaching 91 percent of GDP in 2027 and the deficit reaching $1.5 trillion.

Under the President's budget, CBO estimates debt as a percent of GDP would increase from 77 percent in 2017 to 81 percent by 2022 before declining to 80 percent by 2027.

Rather than deficits swiftly declining until the budget is balanced in 2027 as in OMB's estimate, CBO finds deficits would instead remain around 3 percent of GDP through 2022, then decline slightly to 2.6 percent by 2027. In dollar terms, they would remain in the $600-$750 billion range for the next ten years.

As a percent of GDP, the budget would roughly stabilize spending over the next ten years while allowing revenue to rise slightly. Spending would remain around its current level of 21 percent of GDP through 2027, while revenue would rise from 17.3 percent in 2017 to 18.0 percent by 2027.

All of these estimates assume $610 billion of unspecified and possibly double-counted Medicaid cuts and $925 billion of unspecified non-defense cuts. We estimate that if these cuts were removed, debt under the budget would instead rise to over 85 percent by 2027.

The large difference between CBO's and OMB's estimates mostly stems from differences in economic assumptions. CBO's projection of average annual economic growth over the next ten years is 1.1 percentage points lower than OMB, and their estimate of GDP in 2027 is 11 percent lower. These differences result in $3.2 trillion of higher deficits and 18 percent of GDP higher debt through 2027. Technical assumptions for federal programs, revenue sources, and policy changes represent a much smaller share of the difference, increasing deficits by $591 billion.

Differences Between OMB and CBO Estimates of the President's Budget

Source of Change 2017-2027 Deficits
OMB Deficits $3.8 trillion
Economic Assumptions $3.2 trillion
Technical Assumptions $591 billion
CBO Deficits $7.5 trillion

Source: Congressional Budget Office

CBO's analysis of the President's budget shows that the budget would fall well short of the ambitious fiscal goals the Administration set, though it would be an improvement over current law. Still, when stripped of its unrealistically optimistic economic assumptions, the budget would not do enough to put debt on a sustainable path.

We will have a full analysis of CBO's report later today.