A subsequent version of this report, An Analysis of the President’s 2015 Budget, was published in April 2014.
This report by CBO presents an analysis of the proposals contained in the President’s budget request for fiscal year 2014. The analysis is based on CBO’s economic projections and estimating assumptions and models, rather than the Administration’s, and incorporates estimates by the staff of the Joint Committee on Taxation (JCT) for the President’s tax proposals.
In conjunction with analyzing the President’s budget, CBO has updated its baseline budget projections, which were previously issued in February 2013. Unlike its estimates of the President’s budget, CBO’s baseline projections largely reflect the assumption that current tax and spending laws will remain unchanged, so as to provide a benchmark against which potential legislation can be measured. Under that assumption, CBO estimates that the deficit would total $642 billion in 2013 and that the cumulative deficit over the 2014–2023 period would amount to $6.3 trillion.
The President’s budget request specifies spending and revenue policies for the 2014–2023 period and includes initiatives that would have budgetary effects in fiscal year 2013 as well. According to CBO’s and JCT’s estimates, enactment of the President’s proposals would, relative to CBO’s baseline, boost deficits between 2013 and 2015 but reduce them by increasing amounts from 2016 through 2023. In particular, the President’s policies would have the following consequences for the budget:
The President’s budget contains a host of proposed changes to spending and revenue policies. By CBO’s estimate, those policy changes would boost revenues by $974 billion and reduce outlays (including interest), on net, by $172 billion, yielding a total of $1.1 trillion in deficit reduction over the 2014–2023 period relative to CBO’s current-law baseline. One major proposal involves the automatic procedures originally specified by the Budget Control Act of 2011 (Public Law 112-25). Those procedures took effect in March 2013 and are scheduled to reduce spending in subsequent years. The President proposes to cancel those scheduled reductions, which would boost outlays relative to the amount in the baseline by nearly $1 trillion over the next 10 years. That proposed change would be more than offset by other proposals that would reduce projected deficits. Among those other proposals, the ones with the largest budgetary impact are these:
Other proposals in the President’s budget include some initiatives that would widen the deficit and some that would narrow it. Those other proposals would change revenues and noninterest outlays by amounts that sum to a net reduction in deficits of $407 billion over the 2014–2023 period ($382 billion in revenues and $26 billion in outlay reductions).
Because the President’s budget would decrease deficits relative to CBO’s baseline projections over the 10-year period, the amount of interest paid on the government’s debt would decline as well. In total, net interest outlays under the President’s budget would be $92 billion below the amounts projected in CBO’s current-law baseline over the 2014–2023 period.
Overall, CBO’s and the Administration’s deficit estimates under the President’s budget are significantly different for this year but similar for the following 10 years. For 2013, CBO’s estimate of the deficit is roughly $300 billion lower than the Administration’s estimate. Most of that difference stems from higher-than-expected tax payments over the past few weeks and recent announcements from Fannie Mae and Freddie Mac about payments that they expect to make to the Treasury. Between 2014 and 2023, the cumulative deficit, if the President’s proposals were enacted, would total $5.2 trillion, according to CBO’s projections, $76 billion (or 1.4 percent) less than what the Administration estimates. CBO’s and the Administration’s estimates of spending under the President’s budget are nearly identical in total: CBO projects just $3 billion more in outlays than the Administration does. However, CBO’s 10-year projections of revenues under the President’s budget are slightly higher than the Administration’s—by $79 billion (or 0.2 percent).