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After four straight years of $1-trillion plus deficits, the non-partisan CBO said that Obama's plan would lead to a $669 billion deficit for fiscal 2013 that ends September 30 and a $675 billion deficit for fiscal 2014 year.
Combined, that is $142 billion higher than the CBO estimates for those years based on current tax and spending laws. Obama's plan assumes that the automatic "sequester" spending cuts are replaced, allowing for higher discretionary spending levels.
Obama's budget plan has virtually no chance of being passed by Congress, but it sets out his administration's bargaining position in the battle over raising the debt limit and reducing deficits in coming months.
The Treasury Department said on Friday it could pay the nation's bills without an increase in the debt limit until sometime after September 2. CBO said on Tuesday that deadline could even stretch until November.
CBO said that because Obama's budget increases revenues by $974 billion over the next decade, largely by raising taxes and limiting deductions for the wealthy, it would result in a $5.2 trillion cumulative deficit over the fiscal 2014-2023 period. That compares with CBO's own $6.3 trillion cumulative deficit estimate based on current law.
The lower deficits under Obama's plan are "encouraging" but unimpressive, said Maya MacGuineas, who heads the Committee for a Responsible Federal Budget, a group pushing for US debt reduction.
"The debt would just barely be falling, meaning that any small change in projections could bump it back up," MacGuineas said after the CBO report's release. "Regardless, additional reforms will be needed over the long-term, especially to slow the growth of federal healthcare programs and shore up Social Security."
Senator Jeff Sessions, the top Republican on the Senate Budget Committee, was far more critical, calling the Obama plan "dangerously unsustainable."
"The country can certainly find more ways to rein in expansive federal programs, departments and agencies, yet the president's plan is to tax more and spend more," Sessions said.
Savings claims reduced
The $1.1 trillion in deficit reduction estimated by CBO is significantly less than the $1.8 trillion in such reduction claimed by the White House when its budget plan was first released in April.
Part of the difference is explained by a general improvement in economic conditions and revenue collection. Massive bailout repayments by government-controlled Fannie Mae and Freddie Mac and wealthy Americans realizing capital gains to beat a January tax increase filled US Treasury coffers faster than expected.
Deficits under Obama's plan would be higher through 2015 because the White House assumes that automatic spending cuts known as sequestration are replaced, which would allow higher levels of discretionary spending by government agencies and the military. The CBO estimates assume that the sequester savings of around $1 trillion over a decade remain in place.
But starting in 2016, deficits under the Obama plan shrink faster than those envisioned by CBO due to a drawdown in war-related spending and as tax revenues accelerate.
The Obama budget deficit would hit a low point of $399 billion, or 2.0 percent of gross domestic product, in 2017, then would rise to $606 billion, or 2.4 percent of GDP, by 2022 - about $283 billion less than under CBO's estimate for that year.
But debt held by the public would edge higher under the Obama plan to 77 percent of GDP in 2014 from about 75 percent currently, before starting a gradual decline to 69.8 percent by 2022.
Under the budget plan proposed by Republicans in the House of Representatives, debt comes down much faster, to 54.8 percent of GDP by 2023, but at the cost of deep cuts to social safety net programs in the party's bid to balance the budget in 10 years.
