Copies of President Obama's Fiscal Year 2014 Budget sit on display… (Andrew Harrer / Bloomberg )
WASHINGTON -- President Obama’s proposed mix of tax hikes and spending cuts would reduce future budget deficits more quickly than under current laws, according to a report issued Friday that could rekindle the dormant budget wars in Washington.
The outlook from the nonpartisan Congressional Budget Office comes as the government is set to reach its debt limit on Saturday, forcing the White House and Congress back to the negotiating table to work out a long-term budget plan that raises taxes, cuts spending -- or some combination of the two.
Already, Washington is on track to have a substantially lower deficit -- $642 billion -- this fiscal year than experts had expected, the budget office reported earlier this week.
After years of $1-trillion shortfalls, it would be the lowest deficit since President Obama took office in 2009 at the start of a deep recession.
DOCUMENT: President Obama’s 2014 budget
Now the budget office, which is considered the official arbiter in fiscal debates, projects that Obama’s proposed spending plan would cut deficits by $1.1 trillion over the next decade.
Obama’s plan would produce slightly higher deficits this year and next, but then they would shrink rapidly by 2023, according to the report.
To be sure, some of the benefit comes from measures that will be disputed by administration critics in Congress, including budget savings as the Pentagon’s role in Afghanistan comes to an end next year. The calculations also don’t include emergency funding for disaster relief, which invariably is required.
At the same time, Obama’s Democratic allies have been highly critical of his proposals to trim monthly benefits of Social Security recipients and other government beneficiaries by reducing annual cost-of-living adjustments.
But the president’s budget proposal, which reflects his last offer in failed talks last year with House Speaker John A. Boehner (R-Ohio), would achieve many of its aims.
The president would replace the $1-trillion across-the-board mandatory budget cuts known as the sequester, which began March 1, with other proposals.
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They include the president’s plan to cap income tax deductions at 28% for top earners, couples who earn more than $250,000 a year. That would raise $493 billion over the decade.
The lower cost-of-living adjustment would bring in $233 billion over the decade -- partly by trimming benefits, but also by adding revenues by pushing more taxpayers into higher brackets.
The budget office wrote that reversing the sequester cuts as the president proposed “would be more than offset by other proposals that would reduce projected deficits.”
In the long run, the nation still faces a looming budget imbalance, driven by the increased costs of an aging population.
In the divided Congress, the president’s budget proposals have virtually no chance of becoming law.
The House, where Republicans are the majority, has approved a plan proposed by Rep. Paul D. Ryan (R-Wis.), the former vice presidential nominee, that would bring the budget to balance in a decade by cutting Medicare and other entitlement programs, lowering tax rates and reducing spending.
The Democratic budget approved in the Senate comes closer to Obama’s proposal but does not cut deficits as much.
Once the debt limit is reached on Saturday, the Treasury Department has said it could take measures to continue paying the bills for some time. But eventually, Congress will be asked to raise the borrowing limit or the nation would risk defaulting on its already accrued obligations.
That prospect is expected to push both the administration and Congress back into budget talks this summer and fall.
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