CBO, with contributions from the Joint Committee on Taxation, released an analysis of the Presidents budget submission for fiscal year 2009 this morning. (I will be summarizing our analysis at a conference held by the National Association for Business Economists today.) A report that presents the full analysis of the President's budget, including CBOs assessment of its macroeconomic effects, will be published on March 19.
CBOs analysis indicates that:
- If the Presidents proposals were enacted, the federal government would record deficits of $396 billion in 2008 and $342 billion in 2009. Those deficits would amount to 2.8 percent and 2.3 percent, respectively, of gross domestic product (GDP). By comparison, the deficit in 2007 totaled 1.2 percent of GDP.
- Under the Presidents proposals, the deficit would steadily diminish from 2009 through 2012, at which point the budget would be balanced; it would remain close to balance in most years through 2018. Several key factors contribute to these outcomes, however. In particular, the President's proposals exclude funding for military operations in Iraq and Afghanistan after 2009, incorporate significant reductions in discretionary spending relative to the size of the economy, and project a substantial expansion of the impact of the alternative minimum tax (AMT).
- The Presidents budgetary proposals would result in revenues that were $2.1 trillion below CBOs baseline projections over the 20092018 period, largely because of proposed extensions of various provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA). The proposals also would lead to outlays that were below CBOs baseline projectionsby an estimated $1.1 trillion over 10 yearsbecause of a smaller amount of funding for discretionary programs and reductions in mandatory spending, particularly in spending for Medicare.