Budget group: New Obama budget plan would fail, could cause tax trigger to be pulled

April 21, 2011

The bipartisan Committee for a Responsible Federal Budget has taken a crack at deciphering President Barack Obama’s murky new budget plan, called the “Framework for Shared Prosperity and Shared Fiscal Responsibility.” And its findings are devastating:

Using CBO rather than OMB numbers, we estimate that the plan is unlikely to result in a declining debt-to-GDP ratio, and would thus rely on the proposed “Debt Failsafe” to achieve further savings.

And that could mean higher taxes or additional spending cuts. As it is, the Obama Framework would save 40 percent less than the Ryan “Path to Prosperity.”  More:

The President’s Framework falls short of both he Fiscal Commission recommendations and those from the House Budget Committee, both of which would reduce the deficit by over $4 trillion and reduce the debt to below 69 percent of GDP by the end of the 10-year period. … Measured against CBO assumptions, it does not appear that the $2.5 trillion of deficit reduction in the President’s Framework would be sufficient to reduce the deficit to 2.5 percent of GDP in 2015 or 2 percent in 2020, as claimed. Using reasonable phase-in assumptions, we estimate that unless the debt failsafe is employed (as it would be in this circumstance), deficits would remain at or above 3 percent of GDP throughout the decade. As a result, debt would continue to slowly increase as a share of the economy, reaching 77 percent of GDP by 2021.


And here are the various debt trajectory paths:


And here is how the various plans compare on the details:


Just like in my analysis here and here, the CRFB found that the Ryan Plan cuts more debt than the Obama Plan. Also note that while  the White House said its plan relied just 25 percent on higher taxes (33 percent if you exclude interest), the CFRB found that it actually relies 30 percent on higher tax revenue (40 percent if you exclude interest.) And since the debt trigger would be pulled, even higher taxes would be possible, as well additional spending cuts.

Committee for a Responsible Federal BudgetCommittee for a Responsible Federal Budget

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

Why is it that every conversation about the budget de-evolves down to Democrats saying Repugs and thinking that raising taxes alone will solve the problem, while Republicans call everyone Democraps and thinking that you can just do targeted cuts with no new taxes. Currently we take in 2.1 trillion in revenues, spend 3.6 trillion and have 14.3 trillion in debt. You can tax the top 10% at a 100% rate and we will still run an annual deficit, while you can cut Social Security, Medicare and Medicade by 100% and we still run an annual deficit.

Any mature individual can see that it will take a combination of both to accomplish and real changes to our fiscal crisis.


Posted by nick.a.adams | Report as abusive

What we need to do is limit congress’ ability to spend to some number say 20% of GDP Except in times of DECLARED war. Take everything back to 2008 numbers and pay forward from there. We know what we brought in in 09, 10, and have a reasonable idea about 11. What we have today is Politicians being philanthropic for their own benefit with OUR money instead of working to pay our bills within our means. Frankly, While there are a few in government who understand their role, most do not. Here is a case where I am for throwing the baby out with the bathwater, gg

Posted by pairOdimes | Report as abusive

That’s funny, I thought the GOP was busy trying to figure out how to let the states go bankrupt. Having failed at that, failed at repealing the Health Act, failing to pass their own budget they are now studying Murky Obama’s.

Really Jimmy, you need to work on the spin for your curve ball – it’s sagging.

Posted by ARJTurgot2 | Report as abusive

How about clawing back the trillions given illegally to Wall Street, before killing citizens to pay the “debt” ?

Posted by seanoleary | Report as abusive