CBO Says Budget Proposal Won’t Balance and Health Bill Will Leave 15 Million Uninsured
July 14, 2017
The Congressional Budget Office (CBO) released their analysis of both the White House budget proposal and the revised Senate healthcare bill. The Labor Market is continuing to stay strong, although forecasts for economic growth are being revised down due to gridlock in Washington, D.C.
- CBO concludes Trump budget would not balance in 10 years. The Congressional Budget Office estimates that President Trump’s budget proposal will reduce deficits by around a third in the next decade, but not by as much as the White House had projected. The CBO states that under the Trump budget, the federal deficit would be around $720 billion by 2027, in contrast to a $16 million surplus as estimated by the White House. The deficit is projected to be 2.6% to 3.3% of GDP over the next decade. The report also estimates that debt held by the public would total 80% of GDP by 2027, which is 11 percentage points below the CBO’s projection under current policy, on account of proposed cuts to government spending. However, the CBO states that it is still unable to provide a thorough analysis of all the macro economic effects or the budgetary feedback from those effects due to the lack of details on many proposed policies. [WSJ]
- Senate unveils revised healthcare bill. Republican leaders in the Senate unveiled the revised version of their bill to repeal and replace Obamacare. Overall changes show that Senate Majority Leader Mitch McConnell has shifted the bill to lean more conservative than moderate. The bill largely kept the Medicaid sections the same, implying that deeper cuts into the program will start in 2025 and funds for the expansion of Medicaid under ObamaCare will end in 2024. The Congressional Budget Office found that such changes will result in 15 million fewer people being enrolled in the program and will cut spending by $772 billion. Measures also include an amendment from Senators Ted Cruz and Mike Lee that allows insurers to offer plans that do not meet all of Obamacare’s regulations. The bill includes new funding of $70 billion over 7 years to help ease costs for the sick remaining in the Obamacare plans. $70 billion has also been added to the original $112 billion to help bring down insurance premiums. The new bill will leave two Obamacare taxes on the wealthy and now includes an additional $45 billion to fight opioid addiction. [The Hill]
Economic Indicators & News
- U.S. labor markets strengthen and producer prices increase. The number of Americans filing for unemployment benefits last week decreased for the first time in a month, while producer prices unexpectedly rose. Both indicators signal that the Fed is on track for a third interest rate hike. Thursday’s jobless claims report from the Labor Department suggested that the labor market buoyancy can help generate some inflation despite price pressures still remaining moderate. Initial claims for state unemployment benefits dropped 3,000 to 247,000. It was the 123rd consecutive weeks that claims were below 300,000, indicating a healthy labor market. This has been the longest run since 1970 with the current jobless rate at 4.4%. The economy also created 222,000 jobs in the last month, resulting in the second biggest payroll increase of the year. The Labor Department also reports that the producer price index for final demand is up 0.1% from last month, and economists project inflationary pressures to increase. [Reuters]
- Forecasters lower economic outlook amid congressional gridlock. A survey of economists conducted by WSJ showed more cautious outlooks for growth, inflation, and interest rates this month, as Congress is currently struggling to pass major legislation. The number of economists seeing downside risks climbed to 57% in this month’s survey. This is the highest rate since before the election. Forecasts for growth in 2018 remained unchanged at 2.4%, but the forecast for 2019 dropped to 1.9%, dipping for the first time below 2%. [WSJ]