Presidential budget requests are rarely to be taken seriously. Congress typically ignores them and grinds out changes in spending and taxes according to its own priorities, in its own good time. Yet even by this standard, the White House’s budget for the next fiscal year is disappointing. Rather than merely failing to solve the country’s rapidly worsening fiscal problems, it chooses to ignore them entirely while advocating an enormous increase in defense spending.
The administration doesn’t actually bother to project deficits and public debt over the next decade. You have to estimate them from spending requests for the coming year and economic assumptions set out in the budget’s supporting “analytical perspectives.”
Crunching these numbers, the nonpartisan Committee for a Responsible Federal Budget reckons that the budget and its economic assumptions imply public debt rising to 103% of gross domestic product in 2029 before falling to 94% in 2036. But this prospect, which seems benign by recent standards, requires economic growth of 3% a year through the decade — far higher than the 2% or less expected by other authoritative forecasters — together with falling long-term interest rates and unimpeded tariff revenue, despite the Supreme Court’s recent ruling that most of the “Liberation Day” duties were unlawful.
If you plug in more plausible assumptions on growth, interest rates and tariffs, deficits would stick at more than 6% of GDP over the next 10 years. The debt ratio would reach 124% of GDP by 2036 and would keep going up from there. Even these more realistic projections are still pretty optimistic in two respects: They assume no recession in the coming decade, and they expect investors to keep on buying U.S. government debt without causing interest rates to spike.
The budget’s main idea is an enormous increase in defense spending — adding up to more than $3 trillion over 10 years, partly offset by cuts in non-defense discretionary spending of around $2.5 trillion. Both proposals are questionable, to put it mildly.