The Congressional Budget Office (CBO) released on Friday a preliminary analysis of the Obama administration’s budget proposal for the 2012 fiscal year. The CBO reported that the administration underestimated its budget proposal’s impact on the national deficit and debt.
“Federal debt held by the public would double under the President’s budget, growing from $10.4 trillion (69 percent of GDP) at the end of 2011 to $20.8 trillion (87 percent of GDP) at the end of 2021,” the CBO wrote.
The CBO noted that they estimate that the deficit will be lower than the administration’s estimate for 2011, but that they project that the administration underestimated the deficit by $2.3 trillion for 2012-2021.
The CBO explained that the difference in estimates, “stems from differences in the underlying projections of what would happen under current law ($1.3 trillion) as well as from differing assessments of the effects of the President’s proposals ($1.0 trillion).”
Of note, the CBO explicitly stated that tax cuts either proposed or extended by the Obama administration would drive the deficit, by decreasing revenue without cutting sufficient spending.
“Those policies would reduce tax revenues and boost outlays for refundable tax credits by a total of more than $3.0 trillion over the next decade relative to the amounts projected in CBO’s baseline,” the assessment states.
The CBO called out the tax cuts included in the two major acts that authorized the “Bush tax cuts” in 2001 and 2003 and that were extended through 2012.
The CBO estimated that the cost of various tax cuts would increased the projected deficit by $3.0 trillion over ten years. The increase in the deficit over the same period will be $2.7 trillion.