President Trump’s budget doesn’t solve the deficit, though it makes a significant dent, the Congressional Budget Office said in a new report Thursday, saying that his deep spending cuts on everything from health care to education would save an additional $3.3 trillion over the next 10 years.
Most of the savings would come after 2020, when those entitlement spending cuts really bite.
But he still never reaches balance, the CBO said, undercutting the White House’s claims that the president’s 2018 blueprint — his first budget — would solve the sea of red ink within a decade.
Deficits would peak at 3.6 percent of gross domestic product this year, and begin an uneven decline, falling to 2.6 percent at the end of the 10-year budget window. That would still mean a $720 billion deficit in 2027, not the small surplus Mr. Trump has claimed — but it’s far better than the $1.5 trillion deficit that would result if nothing changes.
Debt held by the public, which under current law is expected to ballon to 91 percent, will instead be at 80 percent and falling, the CBO said.
But Mr. Trump was too optimistic in his projections of economic growth, analysts said. Where the president projected a major recover, the CBO said the economy would only improve slightly, and only in the later years of the budget window.
In a Wall Street Journal op-ed Thursday, White House Budget Director Mick Mulvaney insisted 3 percent annual growth is possible. He said President Reagan helped the country out of stagflation to reach growth about 4 percent, and predicted Mr. Trump can try as well.
“That is what a recovery looks like, and what the American economy is still capable of achieving,” he wrote.
Maya MacGuineas, president of the watchdog group Committee for a Responsible Federal Budget, said it wasn’t surprising that Mr. Trump’s budget fell short of balance. She said it’s going to be hard to tackle debt while refusing to touch two of the biggest causes of exploding deficits — Social Security and Medicare.
“As much as we would like to fix the debt with a wave of a magic wand, it is just not that simple,” she said. “Righting our fiscal ship will require tough choices, especially when it comes to taxes and entitlement spending. The president’s budget, unfortunately, has yet to confront those choices.”
Congressional Democrats were less charitable.
“The CBO report shows that the president built his budget on fantasy projections,” said Rep. John Yarmuth, the top Democrat on the House Budget Committee, who said the analysis was bad enough that it should convince Republicans to reject the president’s plans.
CBO’s report said there were parts of Mr. Trump’s blueprint that they couldn’t evaluate because the administration didn’t have enough details. That was particularly true when it came to Mr. Trump’s plans for economic growth.
Also Thursday, the trustees who oversee the financing of Social Security and Medicare released their annual report confirming Ms. MacGuineas’s sense that the programs need attention.
In theory, Social Security and part of Medicare are supposed to be paid for through the trust funds, based on payroll taxes.
But Social Security has been paying out more in benefits than it’s collecting in taxes since 2010.
And even when income from the “trust funds” are included, the program will run out of cash in 2034. Medicare’s hospital insurance trust fund will run out of money even earlier, in 2029.
Within a decade, taxpayers will be shelling out nearly $1 trillion a year from general revenue to prop up the programs.
All told, over the 75-year actuarial life of Social Security, the program faces a $12.5 trillion shortfall — meaning that by 2035, the government would have to cut benefits by more than 20 percent.
Budget watchdogs said the report should be a wake-up call for Washington. But liberal advocates saw the numbers differently, calling Social Security “strong and growing” and calling for tax increases so benefits can be hiked.