CBO: Obama’s 2013 budget will aid economic recovery but add to long-term debt
The Obama administration’s 2013 budget will boost the economy and employment in the short-term but add to the national debt and hurt the economy in the long-run, according to the Congressional Budget Office.
Responding to the sluggish economic recovery, President Barack Obama called for $1 trillion in tax cuts and $500 billion in spending to bolster consumer demand, which is critical for creating jobs and lowering unemployment.
But Obama’s proposed tax cuts – including permanently reducing income tax rates for individuals earning less than $200,000 a year or couples earning less than $250,000 a year – would increase the federal deficit by $2.4 trillion.
The CBO estimated that the 2013-2022 deficit would total $6.4 trillion and warned that raising the deficit to such an extent would “more than offset the favorable effects” of lowered taxes in the future. The President’s policy would lower the economic output between 2018 and 2022 as the U.S. spends more money to service its debt. The CBO’s analysis indicated that the economic output from 2018 to 2022 will be between 0.5% to 2.2% lower than the current trajectory.
Short-term effects between 2013 – 2017:
- The economy is expected to grow by up to 1.4% under the President’s plan.
- The President’s budget would add $1.5 trillion to the deficit.
Long-term effects between 2018 – 2022:
- The economic output is expected to decrease by between 0.5% to 2.2% under the President’s budget.
- The President’s plan would add another $2 trillion to the deficit during this period.
- Congressional Budget Office: The Economic Impact of the President’s 2013 Budget (PDF)
- WhatTheFolly.com: CBO blames high unemployment on weak consumer spending
- WhatTheFolly.com: Analysis: Obama’s budget seeks to boost jobs & strengthen economic recovery
- WhatThefolly.com: CBO projects Obama’s tax cuts will add trillions to deficit