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CBO Analysis Exposes Trump’s Faulty Fiscal Policy

By / 5.30.2018

President Trump’s most recent budget proposal was widely panned when it was released in February for being both fiscally irresponsible and dependent on unrealistic economic assumptions. An analysis published last week by the non-partisan Congressional Budget Office confirms these criticisms were valid and highlights the significant difference between the Trump administration’s approach to fiscal policy and that of Trump’s predecessor, President Barack Obama. Based on CBO’s analysis, anyone who criticized Obama’s fiscal policy for being irresponsible should be outraged about Trump’s.

When the Obama administration released its final budget proposal in 2016, CBO estimated that it would result in the national debt held by the public equaling 77.4 percent of gross domestic product in 2026. According to last week’s CBO report, debt under the most recent Trump administration budget proposal would reach 85.3 percent in the same year. In dollar terms, CBO estimates that the federal government would accumulate over $2 trillion more in debt by 2026 under the most recent Trump budget than it estimated would be accumulated under the final Obama budget two years ago.

Perhaps more interesting is the discrepancy between the projections of CBO and Trump’s Office of Management and Budget: CBO projects debt as a percent of GDP will be almost 9 percentage points higher in 2026 under the Trump budget than OMB projected in February. By comparison, the difference between OMB’s and CBO’s estimates of the final Obama budget was only about 2 percent of GDP.

The Trump administration’s unrealistic budget forecasts continue its pattern of dubious economic claims. Prior to the passage of last year’s tax legislation, for example, the Trump administration claimed it would fully pay for itself or even reduce the national debt. CBO, on the other hand, now projects the legislation to cost roughly $2 trillion over the next decade – an assessment most independent analysts largely agree with.

But even CBO’s forecasts likely understate the debt that would be accumulated under the Trump administration’s fiscal policy. CBO is required to score the president’s budget assuming even its most unrealistic policy proposals could be enacted. These policies include deep cuts to non-defense discretionary spending (the category of federal spending that includes virtually all non-defense, non-entitlement programs), which would reduce such spending below its lowest level as a share of the economy since before World War II.

Just before the Trump budget was published, however, the Republican-controlled Congress passed – and President Trump signed – legislation that significantly increased both defense and non-defense discretionary spending. By the end of the projection period, CBO estimates that non-defense discretionary spending under the Trump budget would be less than half what it would be if the spending policies in February’s budget deal were extended. The idea that Congress would suddenly reverse course and support such deep cuts to this long-starved category of federal spending is outlandish at best.

Altogether, last week’s CBO report should serve as a damning indictment of the Trump administration’s faulty fiscal policy. It’s remarkable that this administration had to rely upon so many flawed assumptions in crafting this year’s budget proposal, and even then, produced debt projections well above those in President Obama’s final budget. President Trump has certainly earned his self-proclaimed status as “the king of debt” with this year’s budget. On the other hand, perhaps it should be no surprise given the recent track record of Democratic and Republican presidents that one of the former would put forth a more responsible budget proposal than one of the latter.