CBO: Deficit Reduced by Half in Trump's Budget
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CBO: Deficit Reduced by Half in Trump’s Budget

During his presidency, we saw Barack Obama give himself credit for reducing the deficit, yet it was simply a statistic’s trick. In 2016 he shared a statistics filled statement as part of the State of the Union speech about lowering the deficit by nearly three-quarters. It’s hard to imagine how could one cut the deficit while amounting the national debt to almost $20 trillion. Obama did it by simply carrying out a hilarious deficit in the first year as president and then spending fewer cash in the coming years, marking it as a reduction.

George W. Bush largest deficit was $454.8 billion at the beginning while Obama hit the top in his first year in office, $1.415 trillion. The only way Obama managed to lower the deficit in the given numbers is by cutting down the deficit to $552 billion by 2016.

Put another way, the smallest deficit of Obama’s presidency was even larger than President Bush’s largest.

Fortunately under the President Donald Trump, there will be a deficit reduction, not just “reduction” from the largest single-year deficit in the American history.

According to the Zero Hedge:

CBO has just released its ‘score’ of the proposed budget of the President Trump, noting that the plan would shrink the deficit by a half from their baseline by 2017. If we accept Trump’s dynamic scoring and 5% growth expectations, the CBO is unable to balance the budget and Yellen’s recent “US debt is unsustainable” warning seems ever more perceptive.

Trump’s budget would notably shrink from the CBO baseline…

According to the estimates of CBO, the deficit would decrease from the $693 billion projected for 2017 to $593 billion in 2018 with the President’s proposals. After that, the deficit would generally increase, reaching $720 billion in 2027. The cumulative deficit for the period 2018–2027 would be $6.8 trillion. As a percentage of output, the deficit would decrease from 3.6 percent of the GDP in 2017 to 2.6 percent at the end of the period. The deficit would be an average of 2.9 percent through 2027. Those assessments exclude any macroeconomic feedback effects.

This would still be a big deficit, and after Janet Yellen warned that the United States debt situation was untenable, the focus on the spending cuts seems more perceptive than ever.

There is some other good news. By the end of the coming decade, the debt held by the public would equal 80 percent of the GDP: 11 percentage points below the debt-to-GDP ratio that is projected in the CBO’s baseline. But as CBO notes, this is due to the adminstration’s hopeful growth estimates.

So, there is good news, and there is bad news.

The good news in this situation is that Trump’s budget shrinks the deficit relative to its current path. The bad news is that we will still be running deficits for the years to come.

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