The CBO has just released an assessment of the President’s budget proposal. Balancing the budget looks unrealistic, even given massively sweeping (and unrealistic) spending cuts.

Here are the projected budget balances, under CBO baseline (blue), as claimed in the Budget submitted by the White House (red), and as assessed by the CBO (green).

Figure 1: Federal budget balance under CBO baseline (blue), President’s budget (red), and President’s budget assessed by CBO (green), in billions of dollars, by fiscal year. Source: CBO, An Analysis of the President’s 2018 Budget, and CBO, An Update to the Budget and Economic Outlook: 2017 to 2027.

Normalized by GDP under baseline CBO projections:

Figure 2: Federal budget balance under CBO baseline (blue), President’s budget (red), and President’s budget assessed by CBO (green), as share of GDP, by fiscal year. Source: CBO, An Analysis of the President’s 2018 Budget, and CBO, An Update to the Budget and Economic Outlook: 2017 to 2027.

There is a lot of wishful thinking in the President’s budget. Consider a decomposition of the differences in estimates. Figure 3 shows that Economic assumptions account for the majority of the difference in estimated deficits, particuarly true in the out years (FY2020 and onward). Of the economic differences, the bulk shows up in revenues — the Administration assumes much faster income growth and hence tax revenue growth.

Figure 3: Federal budget balance under CBO baseline (blue), President’s budget (red), and President’s budget assessed by CBO (green), in billions of dollars, by fiscal year. Negative numbers indicate that such differences make the CBO estimate of the deficit larger than the Administration’s estimate. Source: CBO, An Analysis of the President’s 2018 Budget, and CBO, An Update to the Budget and Economic Outlook: 2017 to 2027.