The Congressional Budget Office said Thursday that under President Donald Trump’s 2019 budget, debt will continue to rise, though, as the Center for a Responsible Federal Budget points out, “at a slower rate than under current law.”
As the CBO analysis notes, on Feb. 12, the Trump administration submitted its annual set of budgetary proposals to the Congress; subsequent amendments were transmitted on April 13.
According to CBO’s analysis:
- Federal debt held by the public would equal 86% of gross domestic product (GDP) in 2028 under the president’s budget, compared with 96% that year in the agency’s baseline and about 78% this year.
- The federal deficit would be $2.9 trillion smaller under the president’s budget than in CBO’s baseline during the 2019–2028 period, CBO estimates. By contrast, the administration estimates that the deficit would be $5.2 trillion smaller than the baseline amount during that period.
- The two largest changes over the 2019–2028 period would be a $2.1 trillion reduction in nondefense discretionary spending (excluding that designated for overseas contingency operations, or OCO) and a $1.3 trillion reduction in mandatory spending for health care.
Trump’s proposals would boost mandatory spending on infrastructure programs by $131 billion over the next 10 years, CBO estimates.
Trump also proposes changes to federal student loan programs that would generate $103 billion in savings to the government between 2019 and 2028, CBO estimates. The proposals would make a number of changes to the Federal Direct Loan Program, including creating a single income-driven repayment plan, eliminating loan forgiveness for some borrowers and eliminating subsidized loans.
Trump’s budget plan also suggests the following:
Extend Tax Provisions That Expire in 2025
Trump wants to extend provisions of the individual income tax and the estate and gift tax enacted in the 2017 tax act that are scheduled to expire in 2025 — which include the current statutory tax rates, a higher standard deduction, the repeal of personal exemptions and limits on certain itemized deductions.
That proposal would reduce revenues by $604 billion over the 2019–2028 period, mostly in the last three years, the Joint Committee on Taxation estimates.
Modify Certain Provisions of the Affordable Care Act
In addition to reducing outlays, the proposal to implement policies similar to those proposed by Sens. Graham, Cassidy, Heller and Johnson in 2017 also would reduce revenues by $143 billion over the 2019–2028 period, CBO and JCT estimate. Revenues would be affected mainly by changes in employment-based health insurance coverage, the repeal of the premium assistance tax credit, and the elimination of the penalty for large employers that do not offer their employees coverage that meets specified standards under the ACA.
Increase Federal Employee Retirement Contributions
The plan would increase federal employees’ contributions to the defined benefit pension plan provided through the Federal Employees Retirement System, boosting those employees’ contributions by 1 percentage point per year until most employees contribute a total of about 7% of their before-tax pay (assuming that the actuarial valuation underlying the program remained unchanged).
Currently, federal employees contribute between 0.8% and 4.9% of their before-tax pay. CBO estimates that implementing that proposal would increase federal revenues by $109 billion over the 2019–2028 period.
— Check out Trump Tax Cut Is the Gift That Keeps on Giving on ThinkAdvisor.