CRFB Breaks Down the President's Budget
Yesterday, we took our first look at the President's FY 2014 Budget, which put forward the final White House deficit reduction offer to Speaker Boehner in the fiscal cliff negotiations, along with several new revenue and spending provisions. We also put out a press release with our initial reaction to the budget proposal and looked broadly at how the savings compare under different baselines.
Today, we've released our full analysis of the President's FY 2014 budget. We take an in-depth look at the budget's fiscal metrics, the deficit reduction offer, the new policy initiatives, and the budget's economic assumptions, and estimate the savings under different baselines.
Following the trend of previous budget proposals this year, debt under the President's budget would fall to 73 percent of GDP by 2023 after peaking at just over 78 percent in 2015. Deficits would fall from 4.4 percent of GDP in 2014 to 1.7 percent in 2023, averaging 2.5 percent over ten years.
To achieve much of this deficit reduction, the President proposes $200 billion in discretionary cuts, $400 in health savings, $400 billion in other spending cuts, $230 in savings from switching to the chained CPI, $580 billion in new revenue savings, and $50 billion in infrastructure spending, compared to OMB's baseline. In all, this proposal would reduce the deficit by $1.8 trillion over ten years.
But the President's budget also contains a number of new initiatives, funded by new revenues and some spending reductions. These include a number of jobs and infrastructure initiatives, universal pre-K and education reforms, and new tax cuts along with extensions of existing tax provisions. The White House would pay for these provisions primarily through tax increases. It also uses a budget gimmick, winding down war and Hurricane Sandy disaster relief spending and counting it as savings, and, to a lesser extent, spending reductions.
The President's Budget contains some provisions that could be part of a comprehensive debt deal, but overall it falls short of the $2.4 trillion in deficit reduction we recommended earlier this year. But the President's budget does put debt on a downward path, as do the House and Senate budget proposals. It is clear that lawmakers have made putting the debt on a sustainable path a priority. This gives lawmakers a great opportunity to move forward. As we conclude in our paper:
We encourage lawmakers to focus on policy reforms that can get bipartisan support and then use them to build a debt deal that is large enough to put the debt on a downward path relative to the economy in the medium and long term. We encourage the President to lead on this issue and use the bully pulpit to help educate the country about why it is so important to address the nation’s fiscal challenges.