White House Press Corps.org: Press Briefing on the President's Meeting with Economic Advisors 08/18/06, Treasury Secretary Henry Paulson, OMB Director Rob Portman

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Press Briefing on the President's Meeting with Economic Advisors 08/18/06, Treasury Secretary Henry Paulson, OMB Director Rob Portman
— Friday, August 18, 2006 —

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Q You referenced the CBO report yesterday. One of the findings of that report was that if the President's tax cuts are extended through 2016, the cost of that plus fixing the AMT would be $3.2 trillion. And that would be on top of a deficit that they're projecting out the next 10 years of $1.7 trillion. Does that estimate square with the estimates that the administration makes? And what kind of problem does that present for you in trying to get the President's tax cuts made permanent?

SECRETARY PAULSON: As we look at the tax cuts, we see a very positive impact of a strong economy that's growing. And when we look at the deficit, we -- all of us wish it were less, but as we look at it as a percentage of GDP, it's at a very comfortable level as a percentage of GDP. And it's really quite noteworthy that the deficit is where it is today, given the fact that we've had hurricanes, given the fact that we've got the need to finance a war.

So our focus was largely on where the real problem lies, and that's with the entitlement and entitlement spending, and what that's going to do to the economy and what it's going to do to the deficit. And that really would be a long-term, structural deficit problem unless we can come up with a fix for it. And we think it's quite possible to come up with a fix that's quite doable; the question is whether we can get the support from Congress to get something done.

DIRECTOR PORTMAN: Just briefly on the CBO and OMB numbers, and their differences, we've now had time to analyze the CBO projections. And it's remarkable how similar we are. I take from your question some of the differences in our modeling. One is, of course, we show the tax relief going out; we show it being permanent. That's cooked into our numbers. So anything you see from OMB and the administration does assume that the tax relief from 2001 and 2003 continues.

CBO, on the other hand, on the emergency spending, assumes -- as they must under their rules -- that whatever emergency spending we did, say, this year with regard to Katrina would continue out indefinitely, same with the global war on terror and any of the Iraq costs, so the amounts we called emergency spending continues out.

But with taking those two differences into account, it is really remarkable how similar we are -- both on our revenue projections and on our outlays -- on our spending projections. In fact, in 2012, as you know, both CBO and OMB show significant reductions in the deficit to the point that it's down to roughly $50 billion each.

I will tell you that in terms of the tax question you ask, one interesting thing to look at is the impact of revenue on our economy, and in particular what percentage of revenue we are raising as a part of our economy. Historically, the average is about 18.2 percent. This year, based on CBO's projections and our projections, we will be slightly above that with tax relief in place.

And again, going forward as Secretary Paulson has said, the big issue is actually on the spending side. And OMB and CBO, again, have very similar projections there. But in terms of the tax relief, if you were not to continue the tax relief, you do have rising revenue as a percentage of the economy. The 18.2 percent is exceeded, and somewhat substantially, over some of those out years, so it's just something to look at. The numbers are very similar. They tell the same story, and that story is that a growing economy has resulted in increased tax revenues, with some reasonable constraint in spending, that has resulted in better deficit projections, going again to the point that in the next five years we see a trend of a declining deficit, even from the levels today, which are consistent with the historical deficit numbers, in terms of a percentage of GDP.

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Posted by WhiteHousePressCorps.org @ 7:15 PM

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