Last week, President Obama gave a speech outlining his plan to reduce the deficit and stabilize the debt in the coming years. This new budget framework was in many ways a revision of his February budget, and outlined $4 trillion worth of deficit reduction through 2023. This framework represents a positive step forward, both because of the substance of the deficit reduction and because it represents the President’s willingness to engage in negotiations to address our mounting debt.
While the new framework (hereafter the “President’s Framework”) is a substantial improvement over the President’s February FY 2012 budget request, it still falls short of the total debt reduction proposed by the Fiscal Commission (which we believe should be seen as a minimum to strive for) as well as short of the House budget resolution, which is based on House Budget Committee Chairman Paul Ryan’s (R-WI) proposal.
This paper attempts to compare the President’s Framework on an apples-to-apples basis to the two other plans and the President’s February budget. Over ten years, the President’s Framework saves about $2.5 trillion. Using CBO rather than OMB numbers, we estimate that the plan is unlikely to result in a declining debt-to-GDP ratio, and would thus rely on the proposed “Debt Failsafe” to achieve further savings.
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