From 2009 to 2013, the cumulative deficit under President Bush’s new budget plan would be $336 billion higher than the deficit projected by CBO under its own baseline, which assumes little change from current law over the same five-year period.
The biggest single difference is over tax policy. The administration’s plan to extend the president’s signature tax cuts after 2010 will help to reduce revenues by about $777 billion, CBO says, chiefly from 2011 through 2013.
This knocks a hole in White House projections for the same period, even if the president were to convince Congress to enact all of his $442 billion in proposed savings, which fall heavily on popular healthcare programs like Medicare. In 2012, where the White House budget predicts a $48 billion surplus, CBO says there is only a 50-50 chance of getting to balance, and even this rests on ignoring long terms costs of the Iraq war.
Democrats can’t afford to gloat because the same numbers also show the steep uphill climb House and Senate Budget Committees will face in writing their own five-year plan this week. The CBO baseline projects a $105 billion surplus in 2012 without the president’s tax cuts or savings. But going into November, Republicans are sure to demand more specificity as to which tax cuts are kept and which expire.
Senate Budget Committee Chairman Kent Conrad (D-N.D.) has promised to protect the most politically sensitive tax cuts, but the costs are substantial, according to CBO and the Joint Committee on Taxation.
In 2012, for example, the combination of rate reductions, tax credits and changes in tax brackets backed by the president would cost as much as $152 billion — wiping out the entire $105 billion surplus.
Add in estate tax relief, the price tag grows by another $69 billion. Another $21 billion would have to be added to preserve lower rates for investment income from capital gains and dividends.
“It will be interesting to see if the majority will assume the largest tax increase in US history,” said New Hampshire Sen. Judd Gregg, the ranking Republican on the Senate Budget Committee.