July 13, 2017 / 6:19 PM / 12 days ago

Trump spending plan will cut deficit but not balance budget - CBO

3 Min Read

U.S. President Donald Trump reacts as he attends a joint news conference with French President Emmanuel Macron at the Elysee Palace in Paris, France, July 13, 2017.Kevin Lamarque

WASHINGTON (Reuters) - U.S. President Donald Trump's proposed government spending plan would reduce the federal deficit over the next decade but fail to balance the budget, the nonpartisan Congressional Budget Office said on Thursday.

The 2018 fiscal year budget, unveiled in May, put numbers on Trump's vision of a government that would boost military spending while radically cutting assistance to lower-income Americans.

The annual budget deficit in 2027 would be about $720 billion under Trump's proposal, the CBO said in a report, not eliminated as promised by the White House, which has projected a $16 billion surplus.

There was no immediate reaction to the report from the Trump administration. But in a pre-emptive strike on Wednesday, the White House wrote on Twitter: "Faulty Numbers = Faulty Results."

Trump's budget, which slashes funding for the Medicaid healthcare program for the poor and disabled, is unlikely to become law in its current form.

Republicans who control the U.S. Congress - and the federal purse strings - will decide whether to make the politically sensitive cuts.

Senate Republicans unveiled revised healthcare legislation on Thursday as part of their party's long-running effort to scrap the 2010 Affordable Care Act, popularly known as Obamacare..

The Senate legislation retained the previous draft bill's phaseout of Obamacare's expansion of Medicaid and sharp cuts to federal Medicaid spending beginning in 2025. The changes to Medicaid have been a point of political contention among Republican lawmakers.

The CBO estimated that Trump's budget would cause the federal budget deficit to shrink relative to the size of the economy over the next 10 years, ranging between 2.6 percent to 3.3 percent of gross domestic product during that period.

The cumulative federal deficit would be one-third smaller than CBO baseline projections that show deficits rising to 5 percent of GDP by 2027, the CBO said.

The CBO said the Trump budget's deficit reduction over the next decade would be lower than the White House projects due to lower estimated revenues and slower economic growth than assumed by the administration.

The CBO said did not take into account all of Trump's proposals that may affect the economy because "the details on many of the proposed policies are not available at this time." The administration's tax reform proposal, for example, "lacked the specificity necessary to evaluate any effects," the CBO wrote.

The deficit reduction created by Trump's budget proposal would result from lower spending over the next decade, the CBO said.

The White House blueprint would cut $2 trillion in mandatory spending, including $1.9 trillion on healthcare.

About $1.25 trillion of that is linked to a bill already passed by the House or Representatives to repeal and replace Obamacare. Trump's budget also proposes saving $610 billion over the next decade by overhauling the Medicaid program, the CBO said.

Reporting by Amanda Becker; Editing by Tom Brown

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