We Could've Told You...

Last week, CBO showed that the President's Budget was way too optimistic about its projections of deficits and debt. But CBO's findings would not have surprised readers of The Bottom Line, who saw us try to predict what the budget would look like using the parameters of CBO's January baseline and getting rid of the unspecified offsets for increased transportation spending and the doc fix.

Since CBO did not update their economic assumptions from January, adding the difference between CBO and OMB's current law estimates and the unspecified offsets in the budget got us very close to the numbers that they put out last Friday. We projected $9.5 trillion of deficits from 2012-2021 and a debt of 87.5 percent of GDP in 2021. On the other hand (well, maybe not the "other hand"), CBO projected $9.5 trillion of deficits and 87.4 percent.

Cumulative deficits between 2012-2021 total $7.2 trillion in the President's budget but only $9.47 trillion in CBO's analysis--a difference of almost $2.3 trillion. The different economic and technical assumptions between CBO and OMB account for roughly $1.3 trillion of this while the unspecified savings account for about $777 billion (including interest).

Comparing Debt Projections for the President's Budget (Percent of GDP)
  2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
OMB Debt
75.1% 76.3% 76.3% 76.1% 76.1% 76.1% 76.2% 76.4% 76.7% 77.0%
CBO Debt 74.3% 77.2% 78.3% 78.9% 79.9% 81.1% 82.4% 84.0% 85.7% 87.4%
CRFB Debt 74.8% 77.3% 78.4% 78.8% 79.6% 80.8% 82.1% 83.9% 85.7% 87.5%

CBO's analysis of the President's budget confirmed what we (and probably many others) had suspected all along--that the budget would in fact not meet its goals of balancing the non-interest budget by 2015 and stabilizing debt as a percentage of the economy. Lawmakers must go further in embracing deficit-reducing policies. The President's budget may have been a start, but CBO shows that it won't be enough.