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