U.S. President Barack Obama's fiscal 2017 budget would produce $6.9 trillion in deficits over the next decade if enacted, about $2.4 trillion less than under current tax and spending laws, congressional forecasters said on Tuesday.
The Congressional Budget Office said in a new analysis, however, that its 10-year deficit estimate is $776 billion higher than the administration's own forecast. This is largely the result of lower revenues resulting from the CBO's projections for slower economic growth, lower wage and salary growth, and lower revenue gains associated with Obama's tax proposals.
Obama's budget calls for limiting tax deductions for high-income taxpayers, increasing capital gains taxes, and imposing minimum taxes on foreign income and about a $10-a-barrel oil tax. The CBO's estimate of a $2.8 trillion revenue gain through fiscal 2026 would also partly come from the enactment of immigration reforms, estimated to result in $386 billion in new revenue over the decade.
Obama's budget plan has no chance of passing in the Republican-controlled Congress. The House and the Senate are working on budget resolutions that are expected to adhere to spending limits agreed to in a two-year budget deal largely negotiated last year by former House Speaker John Boehner and the White House.
Some Republican conservatives, however, have called for lower spending levels for government agencies or savings elsewhere in the budget.
The nonpartisan CBO said that spending outlays would also be higher in Obama's budget by about $400 billion over the 10-year period than under current laws.
In the near term, the agency said, the deficit under Obama's budget for fiscal 2017 would be $433 billion, versus $550 billion under current law. In 2018, the deficit would fall to $383 billion, or 1.9 percent of gross domestic product, before steadily climbing to $972 billion, or 3.5 percent of GDP, in 2026 as costs associated with aging Baby Boomers mount.
Over the decade, the CBO said, the cumulative 10-year deficit would be 3 percent versus 4 percent with no changes in law. Many economists say deficits under 3 percent of GDP are considered sustainable.
Debt held by the public in 2026 would be 77.4 percent of GDP under Obama's budget versus the current trajectory of 85.6 percent.