Graph Notes
----- -----
1st * Lower government consumption after 2013
^ Higher taxes after 2013
2nd EGTRRA consists of extension of expiring EGTRRA provisions and
acceleration of individual income taxes
CBO'S ESTIMATES, FROM SUPPLY-SIDE MODELS, OF THE CUMULATIVE BUDGETARY
IMPACT OF THE PRESIDENT'S PROPOSALS (in billions of dollars)
Budgetary Cost with Macroeconomic Feedbacks 2004-08 2009-13 2004-13
--------------------------------------------------------------------------
Conventional Estimate of President's Proposals~ -802 -1908 -2710
Textbook Growth Model.......................... -847 -2126 -2973
Closed-Economy Life-Cycle Growth Model
Lower government consumption after 2013...... -846 -2194 -3040
Higher taxes after 2013...................... -745 -1817 -2562
Open-Economy Life-Cycle Growth Model
Lower government consumption after 2013...... -880 -2013 -2893
Higher taxes after 2013...................... -753 -1760 -2513
Infinite-Horizon Growth Model
Lower government consumption after 2013...... -775 -1989 -2764
Higher taxes after 2013...................... -680 -1587 -2267
Budgetary Savings or Cost(-) as a
Percentage of the Conventional Estimate^ 2004-08 2009-13 2004-13
--------------------------------------------------------------------------
Textbook Growth Model.......................... -6 -11 -10
Closed-Economy Life-Cycle Growth Model
Lower government consumption after 2013...... -6 -15 -12
Higher taxes after 2013...................... 7 5 5
Open-Economy Life-Cycle Growth Model
Lower government consumption after 2013...... -10 -5 -7
Higher taxes after 2013...................... 6 8 7
Infinite-Horizon Growth Model
Lower government consumption after 2013...... 3 -4 -2
Higher taxes after 2013...................... 15 17 16
~ CBO's estimate of the budgetary impact assuming no macroeconomic feedbacks.
^ A negative number means that the macroeconomic feedbacks are estimated to
increase the budgetary cost; a positive number, that they are estimated to
reduce it (or provide savings).
Notes: The 'textbook' growth model is an enhanced version of the model
developed by Robert Solow, a pioneer of growth-accounting theory. For a
detailed description of the model, see Congressional Budget Office,
CBO's Method for Estimating Potential Output: An Update (August 2001).
The life-cycle growth model, developed by CBO, is described in Shinichi
Nishiyama and Kent Smetters, 'Consumption Taxes and Economic Efficiency in a
Stochastic OLG Economy,' Technical Paper 2002-6 (December 2002), available
from CBO's Macroeconomic Analysis Division or at www.cbo.gov/tech.cfm.
The infinite-horizon growth model is an enhanced version of a model first
developed by Frank Ramsey; see Robert J. Barro and Xavier-I-Martin,
Economic Growth (New York: McGraw-Hill, 1995).
The three models reflect a wide range of assumptions about the extent to
which people are forward-looking in their behavior: in the textbook model,
their foresight is the least, while in the infinite-horizon model, it is
perfect and extends infinitely to include a full consideration of effects
on descendants.
In models with forward-looking behavior, CBO had to make assumptions about
how the President's budget would be financed after 2013. CBO chose two
alternatives - cutting government consumption or raising taxes.
===========================================================================================================
CBO'S ESTIMATE OF THE COST OF THE PRESIDENT'S BUDGETARY PROPOSALS
(In billions of dollars) Total, Total,
2004- 2004-
President's Revenue Proposals 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2008 2013
-----------------------------------------------------------------------------------------------------------
Extend expiring EGTRRA provisions 0 1 1 1 1 2 2 2 134 224 234 5 602
Provide dividend exclusion 8 23 26 29 32 36 39 44 48 52 59 147 388
Accelerate individual income tax cuts 25 78 51 27 19 15 12 8 1 0 0 190 211
Extend experimentation credit 0 1 3 4 5 6 7 7 7 8 8 19 56
Increase AMT exemption 1 9 14 13 0 0 0 0 0 0 0 36 36
Increase expensing for small business 1 3 3 3 3 3 3 2 2 2 2 15 27
Deduction for long-term care insurance 0 0 0 1 1 2 2 2 3 3 3 4 18
Charitable deduction for nonitemizers 0 1 1 1 1 1 2 2 2 2 2 7 15
Affordable 1-family housing credit 0 0 0 0 1 1 2 2 3 3 3 2 15
Refundable health insurance credit 0 0 1 1 1 1 1 1 2 2 2 5 13
Expand tax-free savings -2 -3 -3 -3 -1 0 2 3 4 4 5 -10 7
Extend AMT of nonref. personal credits 0 0 0 0 0 0 0 0 0 0 0 1 1
Other proposals a 1 5 7 7 7 7 7 7 7 6 6 32 66
-------------------------------------- --- --- --- --- --- --- --- --- --- --- --- ----- -----
Total Revenue Cost 35 117 105 87 71 74 78 81 212 307 324 454 1455
President's Outlay Proposals 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 04-08 04-13
-----------------------------------------------------------------------------------------------------------
Defense discretionary 0 -1 2 8 13 22 28 32 34 36 38 44 211
Other discretionary 0 0 -7 -9 -10 -11 -11 -13 -14 -16 -17 -37 -108
Medicare 0 6 10 33 38 43 46 49 53 58 64 130 400
Medicaid and SCHIP 0 8 7 9 8 9 9 9 8 4 1 40 72
Health care tax credit 0 0 5 6 6 6 6 6 6 5 5 23 51
Earned income and child tax credits 4 1 5 4 4 4 4 2 0 11 11 17 45
Postal Service 3 3 3 3 3 4 4 4 5 5 5 15 38
Unemployment insurance 0 0 0 0 1 2 3 3 3 3 3 2 17
Reemployment benefits 0 3 1 0 0 0 0 0 0 0 0 4 4
Customs fees 0 -1 -1 -2 -2 -2 -2 -2 -2 -2 -2 -8 -18
ANWR 0 0 0 -2 0 0 0 0 0 0 0 -2 -2
Spectrum auctions 0 0 0 0 2 2 0 -1 -1 -3 -3 5 -2
Other mandatory -2 1 4 3 2 1 1 1 1 1 1 11 17
-------------------------------------- --- --- --- --- --- --- --- --- --- --- --- ----- -----
Total Outlay Cost (except interest) 6 18 29 54 65 79 86 91 93 103 106 245 725
Net interest 0 3 13 20 28 39 50 65 80 102 131 103 530
Total Revenue Cost 35 117 105 87 71 74 78 81 212 307 324 454 1455
-------------------------------------- --- --- --- --- --- --- --- --- --- --- --- ----- -----
Total Cost of President's Proposals 41 138 147 161 164 192 214 237 385 511 561 802 2710
CBO Baseline Deficit(-) or Surplus -246 -200 -123 -57 -9 27 61 96 231 405 459 -362 891
Cost of President's Proposals 41 138 147 161 164 192 214 237 385 511 561 802 2710
-------------------------------------- --- --- --- --- --- --- --- --- --- --- --- ----- -----
Deficit Under President's Proposals -287 -338 -270 -218 -173 -166 -153 -141 -154 -106 -102 -1164 -1820
===========================================================================================================
COMPARISON OF PROJECTED DEFICITS AND SURPLUSES IN CBO'S BASELINE AND
IN CBO'S ESTIMATE OF THE PRESIDENT'S BUDGET (in billions of dollars)
Total, Total,
Actual 2004- 2004-
President's Budget 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2008 2013
-----------------------------------------------------------------------------------------------------------
On-Budget Deficit(-) -317 -452 -512 -464 -429 -404 -416 -421 -427 -458 -424 -434 -2225 -4389
Off-Budget Surplus 160 165 174 194 211 231 250 268 286 304 318 331 1061 2569
--------------------------------- --- --- --- --- --- --- --- --- --- --- --- --- ----- -----
Total Deficit(-) -158 -287 -338 -270 -218 -173 -166 -153 -141 -154 -106 -102 -1164 -1820
CBO's Baseline
-----------------------------------------------------------------------------------------------------------
On-Budget Deficit(-) or Surplus -317 -408 -373 -317 -269 -240 -224 -207 -190 -73 88 128 -1423 -1678
Off-Budget Surplus 160 163 173 195 212 231 250 268 286 304 318 331 1061 2568
--------------------------------- --- --- --- --- --- --- --- --- --- --- --- --- ----- -----
Total Deficit(-) or Surplus -158 -246 -200 -123 -57 -9 27 61 96 231 405 459 -362 891
Difference
-----------------------------------------------------------------------------------------------------------
On-Budget Deficit(-) or Surplus 0 -43 -139 -146 -160 -164 -192 -215 -237 -385 -511 -561 -802 -2711
Off-Budget Surplus 0 3 1 -1 * * * * * * * * * 1
--------------------------------- --- --- --- --- --- --- --- --- --- --- --- --- ----- -----
Total Deficit or Surplus 0 -41 -138 -147 -161 -164 -192 -214 -237 -385 -511 -561 -802 -2710
Memorandum:
Total Deficit(-) or Surplus Actual
as a Percentage of GDP 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 04-08 04-13
-----------------------------------------------------------------------------------------------------------
President's budget -1.5 -2.7 -3 -2.3 -1.7 -1.3 -1.2 -1 -0.9 -0.9 -0.6 -0.6 -1.8 -1.3
CBO's baseline -1.5 -2.3 -1.8 -1 -0.5 -0.1 0.2 0.4 0.6 1.4 2.4 2.6 -0.6 0.6
Debt Held by the Public Actual
as a Percentage of GDP 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 04-08 04-13
-----------------------------------------------------------------------------------------------------------
President's budget 34.3 35.8 36.9 37.4 37.3 36.8 36.2 35.4 34.6 34 33.1 32.2 n.a. n.a.
CBO's baseline 34.3 35.5 35.5 34.7 33.5 31.9 30.2 28.3 26.3 23.7 20.3 16.8 n.a. n.a.
* between -$500 million and $500 million; n.a. = not applicable.
Note: On-Budget Deficit or Surplus consists of all deficits and surpluses
except for Social Security surplus plus net cash flow of Postal Service.
Source: Congressional Budget Office, An Analysis of the President's Budgetary
Proposals for Fiscal Year 2004, Tables 1, 8, and 16; online at
http://www.cbo.gov/showdoc.cfm?index=4129&sequence=0 (html) and
ftp://ftp.cbo.gov/41xx/doc4129/03-31-AnalysisPresidentBudget-Final.pdf (pdf)
