Today, the Congressional Budget Office released its analysis of President Obama’s fiscal year (FY) 2014 budget. CBO found that, if enacted, the president’s proposals would increase deficits in the near term (in part due to cancellation of sequestration cuts and a permanent fix to the Medicare physician payment formula), and reduce deficits (by larger amounts) in the later years of the decade, for net debt reduction of $1.1 trillion from the CBO current law baseline between FY2014 and FY2023. Debt held by the public would reach 70 percent of GDP by 2023, versus 74 percent under the baseline.
The president would achieve this deficit reduction mostly through net revenue increases ($974 billion) and some reductions in outlays ($172 billion) above and beyond replacing the sequester and fixing Medicare’s Sustainable Growth Rate. The largest proposed revenue increase is to cap the value of certain deductions and exclusions at 28 percent, which would increase revenues by $493 billion between FY2014 and FY2023. The largest spending reduction in the proposal would result from the combination of proposed changes to Medicare, which would save $225 billion, net of the cost of the “Doc Fix,” over the next decade. One proposal, which would affect both spending and revenues, is to adopt a more technically-advanced measure of inflation, the chained CPI, which would contribute $232 billion in deficit reduction by 2023.
Overall, CBO’s estimates of the budget effects of the president’s proposals are not significantly different than the estimates developed by the Office of Management and Budget, which prepares the president’s budget. While the Senate and House have each approved a budget resolution, a conference agreement to bridge the differences between the proposals has not yet been reached.