A guide to gimmicks in the fiscal 2012 budget
To quote H.L. Mencken, there are lies, damn lies and statistics. And then there are federal budgets.
When it comes to the federal budget, President Obama and congressional Republicans are miles apart. When it comes to talking about budget numbers, they are peas in a pod.
Both sides inflate numbers, exaggerate facts, and twist meanings, making the reality almost incomprehensible to ordinary Americans. They spend most of their time arguing about the minor--a relatively tiny slice of the budget known as nondefense discretionary spending--and largely leave untouched the real culprits of the budget deficit, such as Medicare.
The president's fiscal 2012 budget blueprint was released last week, so the material to draw from is richer. But Republicans play their own budget tricks, and more likely will be revealed when the House Budget Committee unveils its own budget blueprint.
Here is a Baedeker's guide to some of the most common tricks, used by Democratic and Republican administrations in the past--and sure to be used in the future.
Inflate the 'baseline'
The baseline is a budgetary term that describes what would happen to the budget over time under current policy. This way, people can reasonably compare what is expected to happen to spending, revenues, deficit and so forth--and then how the proposed policies might impact the results.
The deficit baseline--what deficits will look like in the future--is greatly affected by estimates of economic growth. Higher growth means more tax revenues, which means lower deficits and less pressure to cut spending.
Lo and behold, the president's budget has more optimistic economic assumptions than the Congressional Budget Office and the Blue Chip consensus economic forecast. For 2013, for instance, the president's budget predicts 4.4 percent real economic growth, compared to 3.1 percent by CBO and 3.0 percent by the Blue Chip consensus. The result is the deficit is lower--to the tune of $1.5 trillion over 10 years--and the road to a balanced budget is easier.
This technique is often called the "rosy scenario," a term first used in a Washington Post headline to describe assumptions in Ronald Reagan's budgets.
The magic asterisk
This was a phrase coined by Reagan budget director David Stockman, which meant that future deficit problems were to be eliminated through future policies, to be announced at a later date.
Obama's budget is replete with magic asterisks, totaling more than $600 billion. The administration proposes to permanently fix a persistent problem with doctors' payments in Medicare, but only comes up with two years to pay for it, even though it is supposed to be a 10-year budget. The budget simply assumes the money for the next eight years--some $300 billion--will be found, and thus will not add to the deficit.
Similarly, the budget assumes that plans for highway spending will be fully funded--at a cost of $328 billion over 10 years--but provides no way to pay for them. The budget simply asserts that some kind of unspecified "bipartisan" funding mechanism will be enacted. That kind of money could be raised through a 25-cent-a-gallon gas tax but such a proposal is unlikely to be embraced by Republicans in Congress. So it is unclear what kind of bipartisan deal would raise these funds.
Proposals sure to be rejected
The budget claims to fix another perennial problem--the alternative minimum tax. Decades ago, this tax--which is aimed at the very rich--was put in the tax code but never indexed to inflation. As a result, every year more of the middle class is ensnared by it and have to pay extra taxes. Every year, Congress patches the problem but never permanently fixes it.
But not only does Obama just come up with three years of money ($320 billion) to fix a problem that would cost $1.5 trillion, he proposes to do so with an idea that Congress has rejected before--cutting the value of charitable deductions for wealthy Americans. So, he takes credit for proposing a way to resolve a serious budget issue, knowing full well Congress will not accept it.
The bottom line
On paper, these simple budget gimmicks save Obama almost $4 trillion over 10 years. They are essential to helping the president assert that he is making deep cuts and tough choices on the way to restoring budget sanity. He only claimed to save $1 trillion over 10 years, which means the illusionary savings outlined above have dramatically helped improve the bottom line.
It was ever thus.
UPDATE, 8:45 AM
A reader correctly points out that H.L. Menken did not coin the "lies, damn lies" quote. (My excuse is that The Washington Post in the past has attributed this quote to him, but that's no excuse--I should have checked.) However, it appears not to be Benjamin Disraeli either, though Mark Twain is reputed to have attributed to the British politician. Hello, readers, do you have any other clues on where this priceless phrase came from?
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