CBO Projects Slightly Smaller Deficits under Current Law

Along with CBO's preliminary analysis of the President's Budget on Friday came an update in CBO's baseline, which actually shows a $234 billion reduction in deficits over the 2012-2021 period compared to its January baseline. It also shows an $81 billion reduction in the deficit this year, meaning that they project the 2011 deficit to not be an all-time high. Instead, it's "only" $1.4 trillion, compared to the nearly $1.5 trillion it was projected to be two months ago. Click here to read our review of CBO's analysis.

Average deficits under the March baseline are now projected to be 0.2 percent of GDP lower than in January. Debt levels would also be slightly lower, reaching 75.6 percent of GDP instead of 76.7 percent in 2021.

Of the $240 billion in changes, about $50 billion result from new discretionary projections based on the previous continuing resolution (CR), which cut $4 billion off of current levels (CBO has not yet incorporated the most recent CR into the baseline).

Reestimates of the coverage provisions from health reform have actually increased the deficit projections by about $90 billion in total (exchange subsidies would cost about $100 billion more but this would be partially offset by other changes). Decreasing the deficit projections, CBO expects about $340 billion in lower Medicare and Medicaid spending mainly as a result of slower projected growth in Medicare Part D and Medicaid long-term care spending.

^{* Estimated by CRFB to include revenue effects.}