CBO Analysis of FY 2011 Budget Shows Soaring Deficits

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CBO Analysis of FY 2011 Budget Shows Soaring Deficits


On March 24, the Congressional Budget Office (CBO) released its official analysis of President Obama's fiscal year (FY) 2011 budget, and it projects the administration's budget proposal would increase deficits by $9.8 trillion over 10 years.

The budget blueprint would increase the public debt from $7.5 trillion in 2009 (53 percent of gross domestic product [GDP]) to $20.3 trillion (90 percent of GDP) by 2020. CBO's debt estimate was 13 percentage points higher than the estimate provided by the Office of Management and Budget (OMB), according to the Committee for a Responsible Federal Budget, Washington, D.C.

CBO projects that the federal government will run a record $1.5 trillion deficit (10.3 percent of GDP) in 2010. Rising revenues will cut the deficit to a low of $724 billion (4.1 percent of GDP) in 2014. But deficits will climb in subsequent years, reaching close to Si trillion in 2018 and almost $1.3 trillion by 2020.

The differences in estimates between CBO and OMB stem from three broad differences in projections. CBO projects higher current-law baseline deficits than OMB. CBO projects they will be $6 trillion versus OMB's $5.5 trillion. CBO also estimates that the administration's proposed budget policy changes would have a larger net cost--roughly $3.8 trillion compared with the $3.1 trillion OMB projects. Finally, CBO projects a lower nominal GDP picture than does OMB in the economic assumptions used to tally up the budget. The different economic assumptions account for nearly 30 percent, or $350 billion, of the difference between CBO's and OMB's projections.

The CBO's projected deficits do not incorporate the effects of the recently enacted health-care reform legislation. Those changes are expected to reduce the deficit by about $120 billion.

In terms of the administration's most expensive proposals included in the policy changes proposed in the budget, renewal of the 2001/2003 tax cuts for families making less than $250,000 would cost the most. …

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