CRFB Analysis of the President's 2012 Budget
We go over more specific aspects of the budget, where it makes admirable progress, and where it comes up short. We will be continuing our blog series on the President's proposal throughout the week, so keep checking back with us.
In our analysis, we discuss projected deficit and debt levels, the Administration's baseline, the effect of the budget proposals on future deficits, and OMB's economic assumptions. We argue that while the budget does make some encouraging moves to control non-security discretionary spending, we will need to go much further to avoid debt rising to enormous heights in future decades.
We've discussed some of these issues already in our blog series. But what's particularly useful in understanding the budget's "adjusted baseline" deficits and the effects that the Administration's proposals will have those deficits. For that, the paper provides an easy to read summary table. Here's a condensed version:
|Tax Cuts for Families and Businesses
|Limit Itemized Deductions||-$114||-$321|
|Other Revenue Increases||-$202||-$451|
|Enact Doc Fixes and Two-Years of Specific Offsets||$127||$308|
|Call for Additional Unspecified Doc Fix Offsets||-$90||-$315|
|5-Year Non-Security Discretionary Freeze||-$153||-$406|
|Assume $50 War Placeholder||-$443||-$1,090|
|Other Spending Proposals||$170||$354|
|Unspecified Measures to Fully Finance Transportation Spending||-$140||-$328|
|Net Interest Savings||-$38||-$331|
Excluding security proposals, the budget would reduce the deficit by $1.1 trillion over ten-years. Normally, that would be a good down payment on beginning to tackle some future deficits. Unfortunately, the budget includes over $640 billion in unspecified savings (a whopping $780 billion when you include interest!), pushing advertised savings significantly downward.
While the budget makes important inroads on controlling non-security discretionary spending, it fails to address the largest drivers of future deficits. The budget fails to make meaningful reforms to health care spending, Social Security, or our outdated tax system. Unfortunately, we've allowed our future deficits to become so large that cuts of the magnitude shown in the President's budget just aren't enough.
But luckily, the budget request isn't law. The White House must work with Congress in coming months to work out a fiscal plan that stabilizes debt as sustainable levels.