CBO: Obama’s Budget Would Add $3.5 Trillion in Deficits Through 2022

According to a new estimate from the Congressional Budget Office, President Obama’s 2013 budget would add $3.5 trillion to annual deficits through 2022 and raise the deficit next year by $365 billion.

The White House claims that the Obama’s budget would reduce deficits by $3.2 trillion over the next decade.

The differences between the estimates from the CBO and the White House budget office are attributable to different baselines and economic assumptions,  the CBO expects the deficit to spike sharply under Obama’s budget due to the expiration of the Bush-era tax rates at the end of 2012.

Obama wants to continue the middle-class tax cuts, something that is reflected in his budget.

The CBO also compares Obama’s budget to a different baseline than that of the budget office. The budget office assumes Congress and the administration will decide to avoid big tax increases and deep spending cuts, something both branches have repeatedly done in the past.

Under this scenario, all of the Bush-era tax rates are extended and the Alternative Minimum Tax is “patched” to prevent it from falling on millions of middle-class taxpayers. If that were the case than Obama’s budget would actually reduce the deficit by $4.3 trillion through 2022.

White House acting budget director Jeff Zients wrote in a blog post that CBO’s report “confirms that the president has a balanced plan to reduce our budget deficits and put the country on a fiscally sustainable path.”

He notes that CBO said that by 2016 deficits would be below 3 percent as a share of the economy and that debt held by the public will decrease and then stabilize as a share of gross domestic product.

The CBO’s estimate of a $365 billion increase to the deficit in 2013 would be caused by Obama’s proposal to increase spending by $137 billion and decrease revenue by $228 billion.

In total, the Obama budget spends $3.7 trillion next year and proposes generating $1.5 trillion from new taxes over ten years.

Over ten years, the Obama budget contains $6.4 trillion in new deficits, slightly less than the $6.7 trillion predicted by the White House.

Obama’s budget would increase the size of the national debt held by the public from $10.1 trillion today to $18.8 trillion in 2022.

According to CBO, the deficit will be $1.3 trillion in 2012, the fourth straight year of trillion dollar deficits despite Obama’s promise to cut the deficit in half after his first term.

In addition to extending the Bush-era tax rates for the middle class, Obama’s budget also proposes to to limit the reach of the Alternative Minimum Tax and restore the estate and gift taxes to 2009 levels. Those tax changes alone reduce revenue and increase spending by $3.5 trillion over ten years.

 

 

 

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