Understanding the federal budget is no easy task and it is made more difficult by the double shuffle employed by most politicians. As we all know everything will be paid for, the deficit is no big deal, we will control the pork barrel projects and our policies and new laws will bring the deficit down (notwithstanding the increase costs that result for the private sector). What you don’t hear about or read about too often is the official assessments from the Congressional Budget Office and the important caveats the CBO adds to its projections, caveats that are genrally ignored by the media and the politicians as they push their agenda. Take a look for your self at two interesting recent reports.
Differences Between CBO’s and the Administration’s Budget Estimates
CBO’s estimate of the deficit under the President’s policies is $55 billion lower than the Administration’s for 2010. For the 2011–2020 period, CBO’s estimate of the cumulative deficit exceeds that projected by the Administration by $1.2 trillion.
Those differences stem mainly from differences between CBO’s and the Administration’s baselines rather than from diverging assessments of the effects of the President’s policy proposals. Overall, CBO’s estimate of revenues between 2011 and 2020 under the President’s budget is below the Administration’s by $1.8 trillion; most of that difference stems from the impact of CBO’s economic assumptions relative to those used by the Administration. However, CBO’s economic assumptions also produce lower estimates of outlays over that same period—about three-quarters of the magnitude of the difference in revenues. In total, differences deriving from economic assumptions account for $0.3 trillion of the gap between the two estimates of the cumulative deficit. The larger difference—$0.9 trillion—results from variation in modeling and other technical assumptions (see Table 1-6).
Very small differences also result from CBO’s incorporating legislation enacted after the release of the President’s budget.
Differences in 2010. CBO’s estimate of receipts for the current year is $47 billion lower than the Administration’s. Differences in the baselines cause the Administration’s estimate of revenues for 2010 under current law to exceed CBO’s by $54 billion; that figure is slightly offset by CBO and JCT’s estimate that the President’s policy proposals will lower revenues by $7 billion less than the Administration’s estimate. Much of the variance between the 2010 baseline revenue estimates arises from technical differences. Those differences may result, in part, from different judgments about the persistence of recent weakness in the collections of individual and corporate income taxes.
The Outlook for Major Health Care Programs and Social Security
CBO projects that if current laws do not change, federal spending on major mandatory health care programs will grow from roughly 5 percent of GDP today to about 10 percent in 2035 and will continue to increase there after.1 Those projections include all of the effects of the recently enacted health care legislation, which is expected to increase federal spending in the next 10 years and for most of the following decade.2 By 2030, however, that legislation will slightly reduce federal spending for health care if all of its provisions are fully implemented, CBO projects. That reduction in the level of spending in 2030 yields lower projections of health care spending in the longer term—even though, owing to the great uncertain ties involved in projecting such spending many decades in the future, enactment of the legislation did not cause CBO to change its estimates of longer term growth rates for spending on the government’s health care programs
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