President Obama remains confident that his economic plan will reduce the federal budget deficit in half by the end of his term, even though an influential Congressional Budget Office analysis is persuading Congress that Obama may have to cut back. The CBO score of the budget proposal, out this morning, projects larger deficits and slower growth rates than Obama's economists have assumed. The new estimates will inform the first drafts of the FY 2010 budget, due next week from budget committee chairs. OMB director Peter Orszag told reporters this afternoon that the numbers would not force a change in what Obama has asked Congress to do. "The budget resolution that emerge should meet the four criteria that we put forward," he said, referring to Obama's promise to cut the deficit in half and invest in health care, energy and education. "All the information that I'm getting from the budget chairs suggests that the House and Senate resolutions will do so."
The CBO score reflects a larger decline in tax revenue that Obama's team had anticipated. Orszag said that such declines have multiplier effects on the deficit. He said that the numbers feature "a lot of variation" over five and ten years. In 2014, for example, the CBO projects a deficit of about $750 billion. But he noted that the difficulty in merging economic variables significantly increasing the confidence interval surrounding those numbers is huge - the deficit, according to the CBO, might be as high as $1.6 trillion that year -- or, it could disappear. For 2010, CBO projects a growth rate of 2.2%, lower than the administration's projection of 2.6% and lower than the forecasts provided by the federal reserve and a board of leading econometricians. Orszag, a former CBO director, called the Congressional score "impartial." He might well have noted that CBO always tends to score presidential budgets more conservatively than most other budget-scoring entities.
But Chuck Grassley, the ranking Republican on the Senate Finance Committee, called the CBO numbers "gospel." CBO's word is the gospel. "Congress and the Administration need to get the message. The buck stops with the American taxpayer. People can afford only so much government spending, even for the worthiest-sounding causes. The White House should take a break from the heavy sales job on the budget and explain missing the mark on red ink by $2.3 trillion," he said.