Yesterday the Congressional Budget Office released its preliminary analysis of the President’s budget proposal for FY12. Let’s compare what the President says about his budget with what CBO says. All Presidential quotes are from his February 15th press conference, and all CBO data is from Table 2 of the new analysis and this historical table.
THE PRESIDENT: When I took office, I pledged to cut the deficit in half by the end of my first term.
CBO: The FY09 deficit was $1,413 B, or 10.0 percent of GDP (Tables E-1 & E-2). The President’s budget would result in a FY13 deficit (the end of his first term) of $1,164 B, or 5.5 percent of GDP. (Table 2) By neither measure does the President’s budget meet the test of “cutting the deficit in half by the end of [his] first term.”
THE PRESIDENT: Our budget meets that pledge and puts us on a path to pay for what we spend by the middle of the decade. [He later cites 2015.] … On the budget, what my budget does is to put forward some tough choices, some significant spending cuts, so that by the middle of this decade our annual spending will match our annual revenues.
Both “pay for what we spend” and “annual spending will match our annual revenues” refer to the President’s new and easier “primary balance” test, in which he sets a much easier goal for himself – balancing the budge excluding ever-increasing interest payments. I explained earlier why this is an absurd and weak policy goal. Does his budget meet his own weak test?
CBO: In FY2015, the President’s budget would result in a deficit of $748 B, or 4.1 percent of GDP. Net interest payments in that year would be $489 B, or 2.7 percent of GDP. He misses his own goal by $259 B, or 1.4 percent of GDP. CBO’s data shows that the President’s budget does not pay for what we spend by the middle of the decade, nor would “annual spending match our annual revenues.” CBO’s preliminary analysis shows the President’s budget fails his own (weak and insufficient) test of “primary balance.”
THE PRESIDENT: We will not be adding more to the national debt.
CBO: Under the President’s budget, debt held by the public would increase from $13.5 trillion in 2014, to $14.4 trillion in 2015, to $15.3 trillion in 2016, to $16.3 trillion in 2017, and so on. Measured as a share of the economy, it would increase from 78.3% of GDP in 2014, to 78.9% in 2015, to 79.9% in 2016, to 81.1% in 2017, and so on. CBO’s preliminary analysis shows the President’s budget will add more to the national debt, measured either in nominal dollars or as a share of the economy.
CBO and OMB always come up with slightly different estimates for the President’s budget. These differences are not slight. If the President were to use CBO’s numbers, he could not say that his budget “cuts the deficit in half by the end of his first term,” nor that it “pays for what we spend by the middle of the decade” nor that “we will not be adding more to the national debt.”