Congressional Budget Office casts doubt on Trump’s economic agenda

WASHINGTON — President Donald Trump had promised that his mix of tax cuts, deregulation and reductions in wasteful spending would spur economic growth and cure America's ailing fiscal health. On Thursday, an independent government analysis of those proposals effectively said, "Not so much."

The rebuke from the nonpartisan Congressional Budget Office casts doubt on Trump's entire economic agenda. It suggests that the vague plan the administration has put forth will not generate the kind of growth needed to bring a wave of new jobs, increase tax revenue and make a major dent in the federal debt.

The budget office described Trump's inaugural budget as overly optimistic, rejecting its promises to balance the federal budget. The Trump budget projected that by 2027, the economy would achieve a small budget surplus. But according to the budget office, the deficit would remain at $720 billion, or 2.6 percent of gross domestic product.

The assessment comes after the Trump administration was criticized in May for releasing a budget that economists said relied on overly rosy growth estimates. It was also panned for using questionable math and offering minimal detail about the president's tax plan, a central component in Trump's plans for improving the economy.

One of the biggest reasons the Trump budget fell short is that the budget office did not agree that its proposals would generate as much economic growth as the White House suggested. The office said that the average gross domestic product growth projected over 10 years is currently 1.8 percent, and that under Trump's plan it would be 1.9 percent — far lower than the 3 percent the administration assumed.

The lack of specifics in Trump's plans was also a problem for the budget office. It said that in many cases where Trump's policy initiatives lacked details, its analysts had to use place-holder figures.

The $4.1 trillion budget for 2018 that the White House proposed recommended large increases in spending on the military and on border security. By assuming rapidly accelerating economic growth, Trump's economic team was able to make the budget balance without making changes to Social Security's retirement program or Medicare, the two biggest drivers of the debt.

Tepid economic growth and an aging population have raised concerns about the future of those programs. The Trump administration said Thursday that the financial outlook for Medicare's Hospital Insurance Trust Fund had slightly improved in the past year but that Social Security still faced serious long-term financial problems.

The Medicare trust fund will be depleted in 2029, the administration said. Last year the government said the trust fund would be exhausted in 2028.

In a companion report, federal officials said the Social Security trust funds for old-age benefits and disability insurance could be depleted in 2034. Last year's report also said that the combined trust funds would be depleted in 2034, but that tax collections would still be sufficient to pay about three-quarters of promised benefits for a half-century more.

More than 60 million people get money from Social Security, Medicare or both. The two programs account for about 40 percent of all federal spending.

Steven Mnuchin, the Treasury secretary, said the trajectory of the programs was not sustainable. But like the other economic riddles that the administration is trying to solve, he said this one could be fixed with 3 percent growth.

"Persistent and strong economic growth can help bring these programs to sustainable solvency," Mnuchin said at a news conference in the Treasury Department's Cash Room. "This is why the administration's program for economic growth is so important."

But the budget office's number crunchers do not expect such lofty growth rates anytime soon. For that reason they have been under fire from Republicans, who have accused them of everything from incompetence to pessimism.

Mick Mulvaney, the White House budget director, has called for the office's influence to be diminished and said recently that its time had passed. This week, the White House released a video on its Twitter account that assailed the credibility of the office because of its scores of the Republican health legislation. "The Congressional Budget Office's numbers don't add up," it claimed.

On Thursday, the White House's Office of Management and Budget found parts of the budget office's work worthy of praise.

"We are thrilled that CBO confirms that the president's proposed budget resulted in the largest deficit reduction they have ever scored," said Meghan Burris, a spokeswoman for the White House budget office. "CBO agrees that this is the largest deficit reduction package in American history."

Over a decade, the budget office said, Trump's budget proposals would reduce the projected $10.1 trillion deficit by $3.3 trillion, not the $5.6 trillion that the White House has projected.

It remains unclear what impact Trump's proposals will have on the deficit if they are adopted. A Tax Policy Center report released Wednesday based on what is known about his tax plan said it could reduce federal tax revenue as much as $7.8 trillion over a decade. Such a shortfall would worsen the fiscal situation and put Social Security and Medicare at risk.

After the budget office released its report Thursday, some fiscal hawks warned that Trump would have to address Social Security and Medicare spending and rely on more realistic economic projections to fulfill his campaign pledge to restore fiscal sanity.

"CBO's analysis shows the president's claim of a balanced budget is built on a house of cards, reinforced by economic growth rates that are far outside of the mainstream consensus and would be unprecedented, given today's demographic realities," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonpartisan advocacy organization.

The White House budget is considered to be a political wish list that Congress, which controls the purse strings, often ignores. Next week, the House Budget Committee is expected to begin debating a 2018 budget resolution, which could include some of the cuts and spending proposals that Trump has requested.

Democrats signaled their resistance Thursday. "The CBO report shows that the president built his budget on fantasy projections," said Rep. John Yarmuth of Kentucky, the ranking Democrat on the Budget Committee.

Robert Pear contributed reporting.