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The CBO Reviews Trump's Budget

The Congressional Budget Office (CBO) has released its analysis of the President’s Budget Proposal. In collaboration with the Joint Committee on Taxation (JCT), the CBO reviewed the President’s proposals to see what the likely impact would be were they implemented. What it found was a major reduction in spending that would reduce the deficit and promote economic growth.

President Trump has requested total discretionary appropriations of $1.15 trillion for 2018, but excluding the proposed net reduction the total comes to $1.17 trillion. Of that amount, defense spending will receive $668 billion which is a net increase of 5 percent from last year while nondefense spending will receive $499 billion which is a net decrease of 13 percent. Overall, that is 3 percent less than last year.

Between 2018 and 2027, the White House’s budget is projected to eliminate $3.3 trillion from the federal deficit. With these cuts in place, the amount of interest payments will be reduced by $300 billion. The totals to $4.2 trillion in its entirety, but there is a projected revenue decline of $900 brillion so that will result in the original reduction which is still a significant cut.

There are some other key reforms in the budget as well. Case and point, the proposal for “lowering the premiums paid by providers for medical liability insurance” and “reducing the use of health care services prescribed by providers when faced with less pressure from potential malpractice suits” would drive down costs by about $64 billion. Another part meanwhile would increase infrastructure spending by $200 billion. In addition, the largest savings will come from repealing Obamacare, which will total $1.25 trillion off the deficit. It also reduces subsidies for student loans which would save $100 billion and possibly drive down college costs as well.

It seems this would have an overall net positive impact on the economy. The percentage of the debt held by the public would total 80 percent by 2027, which is actually a decrease of 11 percent from the CBO’s current baseline. With that in mind, GDP growth would be higher as a result of the budget cuts by 0.2 percent than current projections in 2022 and 0.7 percent higher in 2027. That is a significant increase for economic productivity, though smaller GDP growth than the White House projected.

The new budget proposal significantly cuts spending. This would help spur economic growth which will be good for the country. The CBO highlights its positive impacts so this is definitely a step in the right direction.